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[[File:Bond certificate.jpg|thumb|A bond certificate with [[coupon]]s on the right]] | [[File:Bond certificate.jpg|thumb|A bond certificate with [[coupon]]s on the right]] | ||
A [[bond]] (also called a [[note]] or an [[MTN]]) is a form of [[loan]]. It is like | A [[bond]] (also called a “[[note]]” or an “[[MTN]]”) is a form of [[loan]]. It is like an [[IOU]] from a company or government. Instead of taking one big [[loan]] from a [[bank]], a company issues lots of little loans, in the form of bonds to investors. To buy a bond is to lend money to the issuing company, who must repay that money by “redeeming” the bond its stated [[maturity date]]. In the good old days, bonds were security-printed certificates with the loan [[terms and conditions]] printed on them. | ||
'''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. | '''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. | ||
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'''[[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. | '''[[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, | '''Electronic trading''': Nowadays, almost all [[bond]]s trade and settle electronically, inside [[clearing systems]], so there are no certificates or coupons, and everything happens in the blink of an eye. But the principal is the same. |