An investment bond is an investment in debt in which there are two parts involved: the lender and the borrower. Often, these loans are given to governments or big corporate agencies by companies, states and other bodies. These kinds of loans are given for various kinds of activities like raising funds, developmental activities etc.
The loans could either be given with a fixed interest rate over the time-period of the loan or may increase with time. “Bond owners” or bondholders are the ones owning the loan or savings bonds.
Savings bonds are the most popular kinds of bonds amongst borrowers because they have a fixed rate of interest. These bonds are not easily transferred or changed. They have a strict rules and regulations which often are not flexile.
These bonds in the U.S. are considered to be the safest investments bonds. It is so because the federal governments if the main issuer of these bonds. In case of loss or theft or any mishap, these bonds can be easily recovered because the information remain with the government and can be accessed easily.
Even though these bonds are safe and a good source of extra income, the interest rates of these bonds are quite low. For a better amount of income or profit, one should keep their bonds intact for longer periods of time like 6 months or more.
A discount bond is a bond that is given or sold to companies or individuals at a rate, which is lower than its nominal value in the secondary market. These bonds have fluctuating interest rates: as the rates increase, the price of the bonds decrease.
These bonds are sold to the clients at various rates before the time of maturity. However, the discount bonds may not guarantee a profit or a loss. The chances of earning a profit or gaining a loss are 50-50. For discount bonds, the interest rates change or may not change with time, but the frequency of interest payments never vary.
Businesses and individuals, who participate in this trade, must keep a well-maintained and informed balance sheet about their gains and losses.