Question

What happens when a bond becomes due?

A.)You pay it back to the issuer, plus interest
B.)The issuer will pay you back, minus interest.
C.)The issuer will pay you back, plus interest.
D.)You pay it back to the issuer, minus interest.

Answer 1

I believe the answer is: C.The issuer will pay you back, plus interest.

The due time of the bond and the interest rate would be mentioned by the issuer before you make the purchase of the bond. The interest that the issuer give back is a form of profit that given because you are willing to take risk to put your money as investment.

Answer 2

When you buy a bond, you're lending your money to a company or a government (the bond issuer) for a set period of time (the term). The term can be anywhere from a year or less to as long as 30 years. In return, the issuer pays you interest. On the date the bond becomes due (the maturity date), the issuer is supposed to pay back the face value of the bond to you in full.