What are bonds and how they work?

[accountinglads]

Fintechzoom.Com Bonds are the forms of debts raised by the governments and the municipalities, as well as corporations. Whenever an investor purchases a bond, he/she is actually loaning the issuer the money in form of regular interest payments also known as coupons and the ultimate repayment of the value of that loan (face value) at a later time (maturity). There is a variation of bonds with respect to risk, return, and maturity. The decision to invest in bonds by investors depends on interest rate, credit rating and duration. Generally, bondholders have a better yield than stocks, thus making them a less risky choice of investment to people who are interested in lower risk and predictability of business earnings.