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  1. Bond

    A bond is a type of fixed-income security that is a form of debt. When an investor purchases a bond, they are essentially lending funds to the bond issuer. In exchange for lending the funds, the bond issuer pays interest to the purchaser at specified times, in addition to paying back the principal amount of the bond. Corporations, federal governments, and local and state municipalities all commonly issue bonds for purchase by investors. Purchasing a bond is similar to a bank lending money for a loan to the bond issuer.

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Reprinted from www.pcmag.com, June 20, 2008, with permission. Copyright © 2008 Ziff Davis Media Publishing Holdings Inc. All rights reserved.