- “A bond is a fixed income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental).”
- Bonds are issued when corporate or government entities need to raise funds to finance their operations. The issuer issues a bond, which included the terms of the loan, interest payments to be made, and the maturity date of the bond. A certificate of ownership is issued to certify the legitimacy of the bond. The certificate also carries the “face value” of a bond, which refers to the contractual amount to be paid at maturity. It also states the “coupon rate”, which is the rate of interest at which the bond was issued.
- “The maturity date is the date on which the principal amount of a note, draft, acceptance bond or other debt instrument becomes due.”²
INVENTION AND INVENTOR
- The first bond was invented in Venice. It was issued by the Venetian government, circa 1100, and was referred to as “Prestiti”(translated from Italian:“loans”). Although they were bonds by their strict definition, they still lacked certain aspects compared to modern-day bonds, namely, certificates of ownership and the date of maturity. All the bonds, along with the name of their owners, were recorded by the government in a centralised loan office, the “Ufficiali degli Prestiti” (translated from Italian:“official loans”) instead.
- The issuing these bonds was to help fund wars that consistently occurred in the region and to spend towards communal needs, most notably their defences.