Bonds related Questions Bonds are simply a loan, an investor owned utility (IOU) in which an investor loans money to government agency or to a company for a period of more than one year. In return, the agency or company issues bonds that promise to pay original principal along with interest on a specified date called maturity date. What are the different types of bonds? Bonds are classified into different categories based on credit quality, tax status, issuer type, maturity and secured/unsecured. Fixed rate bonds, high yield bonds, inflation linked bonds, zero coupon bonds, asset-backed securities, subordinated bonds, and perpetual bonds are some of the different types of bonds for investment in India. Who issues bonds? Bonds are issued by governments, corporations or companies, government sponsored entities in the India such as Federal Home Loan Mortgage Corporation; municipalities, supranational agencies such as the European Investment Bank or the Asian Development Bank; credit institutions and a variety of institutions. Why bonds are issued? Government Bonds and corporate Bonds. Corporations need to raise money for their endeavors. For instance, if a corporation needs to build a new office building or if government needs to construct a new school or repair streets, they require money to get the work done. To meet their need, they borrow money from the public and in return they issue bonds.
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