BONDS & ITS FEATURES

A certificate which is evidence of a debt on which the issuer promises to pay the holder a specified amount of interest for a specified length of time, and to repay the loan on its maturity. Strictly speaking, assets are pledged as security for the loan, except in the case of government bonds, but the term is often loosely used to describe any debt issue. Bonds are issued by corporations and by federal, provincial and municipal governments. Bond holders are first in line before shareholders to claim any of a company's assets in the event of liquidation.

Bonds are tradable instruments (debt securities) which are issued by a borrower to raise capital. They pay either fixed or floating interest, known as the coupon. As interest rates fall, bond prices rise and vice versa.