Wed, Jul 16th, 2014
A bond is an interest bearing or discounted government or corporate debt security that obligates the issuer (corporate or government entity) to pay the bondholder (investor): 1) a specified sum of money , usually at specific intervals during the term of the investment, in the form of?coupon payments; and 2) the loaned amount (principal amount invested)at?maturity. In essence, the investor loans money to the bond issuer for a specified period of time, usually at a fixed rate of return. Thus, the investor as the bond holder has an IOU from the issuing entity. A bond holder has no corporate ownership privileges, as stock holders do, in the case of a corporate issuer. An issuer may offer secured or unsecured bonds for sale. A secured bond is backed by collateral which may be sold by the bond holder to satisfy a claim if the bond's issuer fails to repay the coupon payments and principal amount invested to bond holders when they fall due. An unsecured bond or debenture is backed by the full faith and credit of the issuer, as opposed to any specific collateral.