Template:Bond - layman

A bond is a form of loan. It is like a corporate IOU. To buy a bond is to lend money to the issuing company. In return the company issues you a bond — in the good old days, a security-printed certificate containing the terms of the loan to the company.

Repayment to bearer: The company will pay principal and interest to the “bearer” of a bond — that is, whoever holds it, and who turns up on the correct payment date and presents the bond to the issuer for redemption.

Interest coupons: If interest is payable, the bond will have coupons — literally, little perforated tabs that you can tear off and present separately — for each interest payment. Hence the expression "coupon" has become synonymous in modern finance with interest.

Transferability: Because the issuer pays whoever holds the bond, this means the bond is negotiable — any bondholder can sell its bond to another investor without the issuer’s permission or knowledge. The issuer doesn't care: it has to redeem the same number of bonds, whoever holds them.

Electronic trading: Nowadays, bonds all trade electronically, so there are no certificates or coupons, and everything happens in the blink of an eye. but the principal is the same.