Key concepts of the basic fixed income instrument

A bond is essentially a loan that an investor provides to the borrower, which may be a corporation or government. In return for this loan, the issuer promises to pay at a specified rate of interest, termed the coupon, to the bondholder in addition to refunding, on maturity, the principal amount-commonly known as the face value. Among the most popular investments, bonds have become one of the most often selected ones simply because of the relatively stable return they produce and, for some, can even be a source of income, particularly to conservatives. To have a better grasp of the bonds, let's learn them first by their key components, types, pricing, and risks.