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A bond is a loan made by an investor to a borrower, like a company or government. The borrower agrees to pay back the loan with interest over a set period.
In Depth
When you buy a bond, you're essentially lending money to an organization. In return, they promise to pay you regular interest payments, often twice a year, for a specific number of years. At the end of that period, known as the maturity date, they pay back your initial investment. Bonds are generally considered less risky than stocks and can be a good way to earn steady income.
Example
If you buy a $1,000 bond from the U.S. Treasury, they might pay you 2% interest ($20) every year for 10 years, and then return your $1,000.
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