When a company or government needs to raise money for, say, a shiny new machine or fancy bridge, it borrows money by selling bonds. Bonds have durations of ten years or more (durations of one to ten years are technically called “notes”). There are different kinds of bonds—typically government or corporate bonds—but generally speaking, if you invest in a bond, you’ll get paid back the full value (or “principal”) at the end of the bond’s duration (“maturity date”) plus interest payments (called the “coupon”). Bonds are considered safer investments than stocks, but have lower earning potential.« Back to Glossary Index
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