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A bond is an interest-bearing security issued by
governments, companies and some other organisations.
Bonds are an alternative way for the issuer to raise capital to
selling shares or taking out a bank loan. Like shares in listed
companies, once they have been issued bonds may be traded
on the open market. A bond’s yield is the interest rate (or
coupon) paid on the bond divided by the bond’s market price.
Bonds are regarded as a lower-risk investment. Government
bonds, in particular, are highly unlikely to miss their promised
payments. Corporate bonds issued by blue-chip “investment
grade” companies are also unlikely to default; this might not be
the case with high-yield “junk” bonds issued by firms with less
healthy financials. (See yield curve.)