March 03, 2025 How Bonds Work Issuance – A company or government sells bonds to investors to raise capital. Interest Payments – The issuer pays periodic interest (coupon payments) to bondholders. Maturity – At the end of the bond term, the issuer repays the original investment (face value). Example: A company issues a 10-year bond with a 5% coupon rate and a $1,000 face value. The investor receives $50 per year (5% of $1,000). After 10 years, the investor gets back $1,000 in addition to the annual interest.