The Advantages of Fixed Interest Bonds

Fixed interest bonds are bonds through which the issuer of the bond commits to pay the buyer of the bond the nominal sum in addition to the interest. Here is an example, given by businessman Eitan Eldar: the value of the bond on the day of issue can be 100, but since the issuer commits to pay an interest of 4%, the value of the issuer’s debt that will be paid to the buyer at the end of the bond period will be 104. In addition to this, a fixed interest bond can be attached to an index, such as the value of the dollar or a consumer’s price index.

The main advantage of fixed interest bonds, according to Eitan Eldar, is that in contrast to other tools in the finance market, whoever buys the bonds knows how much interest they will receive for it at the end of the bond period and therefore it is a relatively secure tool. In addition, for most fixed interest bonds it is customary to pay interest twice or once a year, so that even though there is an obligation to own the bond until repayment for a number of years, part of the yield is received at a higher frequency

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