What Are Bonds?

What this unit covers

Meet the bond as a loan you make to a government or company, in plain terms: face value, coupon and maturity, the third basic asset class alongside shares and commodities.

By the end you will be able to

• Explain a bond as a structured loan, distinct from owning equity.
• Identify face value, coupon, and maturity as the terms of a lending relationship.
• Distinguish a fixed-sounding promise from a certain one.

How it starts: Money Given for a Promise

1. You have 50,000 rupees sitting idle and someone wants to borrow it.
2. They offer 4,000 rupees extra in a year, fixed and written down.
3. The terms are fixed, so does that mean your money is safe?

Words you will meet

Bond

A formal loan you give to a government or company for agreed terms of repayment.

Face value

The amount you lend, and the amount you get back at maturity.

Coupon

The extra payment a bond pays you at set intervals, usually once or twice a year.

Maturity

The date on which the borrower returns your full face value.

In this module: Interest Rates & Bonds

1. What Are Bonds? (this unit)
2. Government vs Corporate Bonds
3. Interest Rates & Bond Prices
4. Yield Curve Simplified