Bonds are loans that the government or a corporation must repay to an investor. Bonds usually pay a fixed amount of interest at regular intervals for a set amount of time. At maturity, the end of that period, the issuer repays the par value, or the original amount of investment, to the bondholder.

     Investors like bonds because they are good investments and usually have low risk. However, because bonds are low-risk investments, their returns are often less than those of other investments. Issuers like bonds because once the bond is sold interest rates on that bond will not go up or down. However issuers must make fixed interest payments and repay the principal when due—even in bad years.

     There are several types of bonds. Savings bonds are issued by the United States government. The United States Treasury Department issues treasury bonds, and state and local governments and municipalities issue municipal bonds. Interest on government-issued bonds is exempt from certain taxes. Corporations sell corporate bonds to raise money to expand their businesses.

     Other types of financial assets include certificates of deposit (CDs) and mutual funds. Markets for financial assets are often classified according to the length of time for which funds are lent. Capital markets are markets in which money is lent for longer than a year. Money markets are markets in which money is lent for less than a year.