What is a Bond?

A bond is usually the least risky investment availible. It is also the investment with the lowest returns. Most people look to bonds as a instrument which gives modest but reliable returns. Bonds in the simplest sense are loans that individuals give to companies and governments. Therefore, the amount of risk and reward is linked to the credibility of the bond seller. If GM were to sell bonds at 18% interest the day before the bankruptcy, it is unlikely anyone would buy them despite the large returns. When a bond seller cannot repay a bond that has matured, the holder of the bond loses the entire investment.