BONDS

Conclusion and Resources

So now you've learned the basics of bonds. Not too complicated, was it? Here is a recap of what we discussed:

• Bonds are just like IOUs. Buying a bond means you are lending out your money.
• Bonds are also called fixed-income securities because the cash flow from them is fixed.
• Stocks are equity; bonds are debt.
• Issuers of bonds are governments and corporations.
• A bond is characterized by its face value, coupon rate, maturity, and issuer.
• Yield is the rate of return you get on a bond.
• When price goes up, yield goes down and vice versa.
• When interest rates rise, the price of bonds in the market falls and vice versa.
• Bills, notes, and bonds are all fixed-income securities classified by maturity.
• Government bonds are the safest, followed by municipal bonds, and then corporate bonds.
• Bonds are not risk free. It's always possible--especially for corporate bonds--for the borrower to default on the debt payments.
• High risk/high yield bonds are known as junk bonds.
• You can purchase most bonds through a brokerage or bank.
• Brokers often don't charge a commission to buy bonds but instead markup the price.
  

See also

Our tutorial on the Money Market

Moodys Investor Service

Standard & Poor's ("S&P")

Dominion Bond Rating Service ("DBRS")