Bond

Definition:

A type of Debt Instrument that represents a fixed principal amount of money and either a Fixed Rate or Floating Rate, used to raise capital by taking on debt rather than equity. Once issued, the issuer owes the bondholders a debt and, depending on the terms of the bond, is obliged to pay interest (referred to as a Coupon) at regular intervals and/or to repay the principal, also known as face value or par value of the bond, at a later date (the Maturity Date).

The credit quality of the issuer and duration of the bond are the most significant factors in determining a bond’s Interest Rate.

In the United States, bonds are almost always issued pursuant to an Indenture.

Also known as a Debenture or Note.

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