Bonds are used by corporations and governments to issue debt. Investors buy these bonds to collect interest that must be paid by the bond issuer. Interest can be variable or fixed. Most bonds have an ending date, which is when the return of principal occurs. Although some bonds are perpetual and have no ending date.
Interest rates are determined by the credit of the bond issuer. Higher credit ratings equal lower interest rates. Bonds are issued to finance the growth of a country or corporation. For corporations that can’t find favorable bank financing, bonds can be a great alternative.
