From time to time each of us has to borrow money. Many organizations (such as governments, corporations), as well as ordinary people also often require money from.
That's just to take large sums of money to legalpersons is much more complicated. Rather than simply promise to return the money they occupied, organizations need to borrow money, promising to return them to the reward.
Bonds are one of these types of borrowing.
In the most general form of the bond isdebt obligation sold by public issuer fixed amount. Borrowed money with the change in the sheet of paper, which indicates how many people lent by what percentage, for how long.
This form of commitment is widely used by governments to finance their activities or restricted cash companies seeking to expand production and market share.
For comparison with other investment bondsyield instruments used for this category of security. Calculate the yield on the bond, you can, by dividing the amount of interest payments for the year to the current price of paper.
For example, if a bond worth $ 2000 brings you$ 150 per year of income from interest, its current yield is $ 150 divided by $ 2,000 and multiplied by 100, that is, 7.5% yield .Tekuschaya: $ 150 / $ 2000 = 0.075 (7.5%)
Keep in mind that when assessing the profitability of bondsIt can not simply be taken as a basis of its coupon rate. Bond prices may vary in accordance with fluctuations in interest rates, so that the bond may be sold at a price different from the face value of the security. If you hold the bond to maturity, you are guaranteed to get its basic costs. But if you want to leave a bond before maturity, you will be forced to sell it at the current price, which can be both above and below the nominal.