Bonds, a common investment tool, are issued by various entities, primarily governments and corporations, as a means to raise funds. When you purchase a bond, you are essentially providing a loan to the entity issuing it. In return, the issuer commits to repaying you the face value of the bond on a predetermined maturity date, along with periodic interest payments. These interest payments are typically made semi-annually, providing investors with a steady income stream.
Governments often issue bonds to fund projects such as infrastructure development or to manage budget deficits. On the other hand, corporations issue bonds to finance expansions, research and development, or to cover operating expenses. Bonds come in various types, such as treasury bonds, municipal bonds, and corporate bonds, each with its unique risk and return profile. Investors choose bonds based on their investment objectives, risk tolerance, and desired income stream.
In summary, bonds serve as a way for governments and corporations to raise capital from investors. Investors, in turn, receive regular interest payments and the repayment of the bond’s face value at maturity. Understanding the issuer, maturity date, and interest payments is crucial for investors looking to diversify their portfolios and generate income.
(Response: Bonds are issued by governments and corporations.)