Fixed Deposits & Bonds

Fixed Deposits and Bonds are ways of earning money over a period of time. The various Banks, financial institutions and even Governments offer these services to individuals.

The idea behind Fixed Deposits and Bonds can be said as lending of your money to a bank or organization for a fixed tenure. The organizations pay you interest on your money.

The process is that you can place your money in Fixed Deposits or bonds in a lump sum for a duration and in return you get guaranteed returns or a guaranteed rate of interest, which depends on the tenure and the organization that issues bonds.

Bonds are where you lend your money to an organization or the Government.You get interest from them periodically on your borrowed money. When the bond matures you get your principal back with the last interest payment.

For example when you deposit your money in a Fixed Deposit your bank keeps it locked for a fixed time, gives you interest of say, 4% to 6%.

On the other hand, an organization issue bonds where in they give you say, 6% to 8% for a bond that expires in two years.

It means you give the organization two lakh rupees and every year until the bond expires you get one lakh fifty thousand from them every six months, with a two lakh from the bond on maturity.