Bond

Topic

Financial Literacy

Definition

A bond is a fixed-income instrument that represents a loan made by an investor to a borrower.

Description

Bonds are a key component of the financial markets, providing a way for governments and corporations to raise capital. They pay periodic interest and return the principal at maturity, making them attractive to investors seeking stable income. Understanding bonds involves grasping concepts like interest rates, credit risk, and yield. In real-world applications, bonds are used in portfolio diversification and risk management. Algebraically, bond pricing involves calculating present value based on future cash flows. In math education, bonds help students understand financial markets and the impact of interest rates on investment decisions. A teacher might say, "When you buy a bond, you're lending money to a company or government, and they pay you interest over time."

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