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You write your name on a piece of paper that says - "IOU so much money" and then you take money from anyone who's willing to give you money in exchange for th
by elSidCampeador 7y ago
You write your name on a piece of paper that says -
"IOU so much money"
and then you take money from anyone who's willing to give you money in exchange for that paper.
Debt = that paper
Selling = basically getting money for that paper
- cryptonector 7y agoIt's important to note that the amount of money you accept for that paper need not be what's written on it. I.e., you could sell a bond saying you'll pay back $1000 + interest and get only $981 for it, say, or maybe $1017 dollars for it, or any other number. If the bond sells for more than its nominal value, then the effective interest rate you pay to borrow will be lower than the nominal interest rate, and if the bond sells for less, then your effective interest rate will be higher than the nominal interest rate.
- navigatesol 7y agoYes and no. The face value of the bond is what you will receive at maturity. When the bond trades in the intermediate term, its price is determined by prevailing and expected interest rates.