Bonds are generally issued by an organization falling in the private or government category to raise funds to accomplish one or more purposes.
Bonds have been around for more than a century and have proven to be a reliable way to invest money for a certain period.
Bonds are relatively safe investment options that yield a fixed income. It works as an additional source of income for an investor. The rate of interest is paid annually. In some case, the interest is also paid monthly.
The yield is the effective interest rate on bonds. The yield will vary inversely with the market price of the Bond. Yield= (Coupon/ Market Price of Bond) X 100
Interest payouts on bonds are fixed; an increase in bond price means you(or buyer) pay more for the same returns, so effective returns are less. Another way is also true: if bond prices decrease, you (or buyer) are paying less for the same returns; hence effective returns are more. Thus bond yield and bond price are inversely related.
Maturity Date- It is the date on which the bond issuer repays bond investors for the money they have lent them. Bonds come in various maturities: short, medium, and long.