BOND LOAN Meaning and
Definition
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A bond loan refers to a type of loan where the borrower, typically a government or corporation, issues bonds to raise funds from investors. This financial instrument combines elements of both a bond and a loan. In a bond loan, the issuer (borrower) promises to repay the principal amount borrowed at a specified maturity date, while also paying periodic interest payments to bondholders.
When a bond loan is issued, it is divided into smaller units, known as bonds or debentures, which are then sold to investors. These individual bonds can have various characteristics, such as different interest rates, maturities, or redemption provisions. The bond loan agreement outlines the terms and conditions of the loan, including the interest rate, maturity date, and repayment schedule.
Investors who purchase the bonds become lenders to the issuer, and they receive periodic interest payments, usually semi-annually or annually. Upon maturity, the bondholder is entitled to the repayment of the principal amount initially invested. The interest payments and principal repayment are typically secured by the issuer's assets, providing a level of security to the bondholders.
Bond loans are commonly used by governments and corporations to finance large-scale projects, such as infrastructure development or expansion plans. They are considered a form of debt financing and provide an alternative to traditional bank loans. Bond loans offer flexibility in terms of raising capital and can attract a wider range of investors due to the various bond features available.
Common Misspellings for BOND LOAN
- vond loan
- nond loan
- hond loan
- gond loan
- bind loan
- bknd loan
- blnd loan
- bpnd loan
- b0nd loan
- b9nd loan
- bobd loan
- bomd loan
- bojd loan
- bohd loan
- bons loan
- bonx loan
- bonc loan
- bonf loan
- bonr loan
- bone loan
Etymology of BOND LOAN
The word "bond loan" is a compound term that combines two separate financial terms - "bond" and "loan".
The term "bond" originated from Middle English in the 14th century, derived from the Old Norse word "böndi", meaning a householder or farmer. Over time, the term evolved to refer to a formal document acknowledging a debt. In the financial context, a bond is a fixed-income instrument issued by governments or corporations to raise capital; it represents a loan made by an investor to the issuer in return for periodic interest payments and the return of the principal amount at maturity.
On the other hand, a "loan" comes from the Middle English word "lon", of Germanic origin. It refers to the act of lending or borrowing something, usually with the understanding that it will be repaid with interest.
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