Bond

It is a financial instrument (security). One party, known as the bond issuer, declares that it is a debtor to the other party, known as the bondholder (who is the owner of the bond), and commits to redeeming the bond. Bond issuance is a form of borrowing. The bondholder is the lender, or creditor, and the bond issuer is the borrower.

• Maturity date: This is the date by which the issuer is obligated to redeem, meaning repay the borrowed funds to the bondholder.
• Face value (par value): This is the value that the issuer repays on the maturity date.
• Issue price: This is the price at which the bond is sold to the initial owner at the time of issuance.
• Interest rate: It determines the amount of interest on the borrowed funds; it is expressed as a percentage of the face value. Typically, interest payments are made regularly, such as annually, semi-annually, or quarterly.

Classification of bonds based on the issuer:

• Government bonds: Issued by the government treasury.
• Corporate bonds: Issued by corporations.
• Municipal bonds: Issued by municipalities or municipal associations.