Trading involves a high risk to the invested capital. Understand all risks before investing

BONDS

A bond is an instrument that typically provides a fixed income in terms of interest. It represents a debt between the purchaser and the borrower. The borrowers are typically the government/government entities or corporations issuing bonds to raise money. The investor buys the bond and periodically receives interest payments up until a maturity date when the principal is paid back to the investor.
Government bonds are usually the safest but offer relatively low interest payments. On the other hand, corporations and other entities which have a higher risk of one-day defaulting, offer a higher interest rate to appeal to the masses for the added risk they bring.
CFI offers access to a variety of corporate and government bonds through its CFI Global platform.

TYPES OF BONDS

Other types of bonds include zero coupon bonds which are typically sold at a discounted price and are paid back at face value when they mature. Also, convertible bonds which can be converted to a set number of stocks.

TERMINOLOGY

Coupon: Percentage of interest to be paid on a bond throughout the length of one year
Maturity: The date the bond will be paid off
Yield: Usually means yield to maturity, the yield accounts for coupon payments as well as the current price compared to its par value
Basis points: hundredth of a percentage point. 1% to 1.5% is equal to 50 basis points
Spread over governments: Is the interest rate differential between government bonds and other types of bonds

COMMISSIONS

Commissions on Bonds vary according to type and location of market. Please contact us for more information.

TRADING EXAMPLE

*Please note that the example below is hypothetical in nature and does not necessarily reflect real conditions.
You have been watching a 10-year corporate bond paying 4% with a face value of $5,000. You decide to buy the bond and hold it till maturity.
Every year you receive 4% interest (5,000 x 4% = $200)
After 10 years, you will receive the $5,000 back and a total of 10 years of interest which amounts to $2,000.
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