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Financial Literacy

Financial Literacy

What is a Bond?

No longer the hippest spy in the world (taken over by Matt Damon or Dragon), the dictionary definition takes bonds from its Latin roots is just “an agreement.” “ A bond is a man’s word.”

Financially, a bond is an obligation to pay back money. In return for renting that money for some period of time and for the risk of that borrower not being able o pay back the money, bonds charge rent or interest.

Bonds have levels of seniority and other features which can make them “feel like” stocks or other kinds of investments. For example, it is not uncommon in large public companies to have 8 or 9 layers of bonds with fancy names like preferred, senior, junior, convertible, subordinated, debenture.

Each of these flavors of bonds has a slightly different taste with the one common protein that they are all different forms of debt obligation.

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