Explanation: Bonds refer to the statements of debt. It is a promise to repay money borrowed after a particular period of time with certain rate of interest. The issuer is equivalent to the borrower and the bond holder to the lender. Bonds enable the issuer to finance long-term investments with external funds.
There are two types of Bonds:
1.Government bonds: Government bonds refer to the bonds issued by the Government or the government department of a country in its own currency. The money raised from the bonds may be used to finance various activities like building roads, hospitals, infrastructure etc.
2.RBI bonds: RBI bonds refer to the bonds issued by Reserve Bank of India. The money raised may be used to finance its various projects like long term lending, development of the economy etc.
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