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What is a bond?
What is a bond?
Updated over a week ago

A bond is a debt instrument issued by corporations or governments to raise capital. If you purchase a bond, you are the lender and the entity issuing the bond is the debtor. In return for lending money, you typically will receive interest payments known as coupon payments. Coupon payments are usually paid semi-annually and each time a coupon payment date rolls around, the issuer sends the interest payment for that period.

Most bonds are considered fixed-income investments, which generate regular, predictable interest payments. Bondholders can hold until maturity to ensure they continue to receive this fixed income-generating cash flow.

Corporate bonds and treasury bonds are both offered here at Public. One of the biggest differences between the two is taxes. While corporate bonds are subject to federal and state taxes, treasury bonds are only subject to federal taxes. For specifics on how this impacts you and the state you live in, consult with your tax professional. In addition, corporate bonds can default if they are unable to fulfill their payment obligations, whereas Treasuries are generally viewed as ‘risk-free’ since it is extremely unlikely the US government will default.

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