FRM Financial Risk Manager Practice Test

A bond is defined as a contract by which an investor lends money in return for a promise of future cash flows. It is also an instrument for large institutions such as governments and large companies to borrow on the world capital markets.

Key Takeaway: With a regular bond, an investor receives a fixed interest payment (called a coupon) for the time he holds the bond. At the end, the par value is paid back, plus the final interest payment.