By definition, a bond is a debt security sold either by governments or corporations, in order to raise money today (short-term) in exchange for promised future payments. A bond certificate describes the terms of the bond, while its maturity date refers to the period concerning its last owed payment. The term of a bond has to do with the time it has left until its maturity.
Bonds can usually pay in two distinct ways:
– Coupons: The promised interest payment of a bond.
– Principal / Face Value: Refers to the notional amount and it’s usually paid at the maturity of the bond.
– Return to the Financial Dictionary –