What Are Bonds? 

A bond is an IOU in which you, the investor, agree to loan money to a company or government or other known entity - called the Issuer - in exchange for a specified rate of interest over a fixed period of time.  Its opposite is a stock, which represents ownership in an entity and is worth only what someone else is willing to pay for it. 

Key takeaways 

• Check the credit rating of the issuer of your bond before you buy 

The buying and selling of bonds can be a very simple and straightforward process, but there are a few features that must be understood regarding the calculations.  

Face Value: