DiscoLucas
commented
7 months ago Here are some notes I made, they're mostly from this link which isn't an academic source :/
If a corporation needs to secure capital for something like a new factory, they can issue bonds to help pay it. The corporation is the bond issuer and needs to determine an annual interest rate known as the coupon. The interest rate is to make the investment attractive and can be determined based on similar bonds on the market. How long it takes the issuer to pay the bond back is tied to the risk of the project. 5 years is less risky than 30 years since many complications can arise over the years. Therefore, a long investment will typically have a higher interest rate to compensate for the risk. Higher risk, higher reward. An independent credit rating service can determine the credit risk to help the investor. Public bonds are sold and bought on the market. They can also be traded through exchanges. The bond's price is determined by its value on the market.
We need to know what bonds is, to make a good educational game about it.