What is a bond and how does it work?

Question

I would take it that this would be covered under our Gestión Financiera 1 and I would attempt to look up an explanation here. Bonds are certificates of debt that are sold to finance an organization or an idea. A bond is essentially a loan that its owner gives to the issuer in exchange for a promise of consistent interest payments and the repayment of the initial purchase amount of the bond at maturity. Most bonds maintain their face value for a set period of time along with an interest rate, allowing the owner of the bond to profit. Therefore, the returns originate from periodic interest payments and the repayment of the bond upon maturity.

Answer 1

Shareholders earn earnings through dividends and capital gain. Shareholders receive dividends, generally on a quarterly basis, from earnings of the company’s profits. When a stockholder disposes their shares at a price higher than the price at which he or she purchased it they make a capital gain.

Comments

This is a great breakdown! I teach financial mathematics at a college and plan to show this content to my students. Thanks Professor Dave!

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Great information. You cover bonds in this segment, but not T-bills and T-notes. Do you plan to cover those separately, or would you consider all of those as various forms of a bond?