Like most loans, the borrower pays interest to the lender. In the case of a bond, the borrower is the issuer of the bond and the lender is you. Bondholders, like other lenders, are entitled to receive interest payments at regular intervals.

Bonds are considered a more conservative asset class than equities because unlike stock dividends, which can fluctuate with earnings, the interest received from purchasing a bond is usually a fixed amount. Default is a bond investor's highest concern, but when the bond is issued by the U.S. Treasury, that risk is considered insignificant. On the other side, bonds are often associated with less potential for growth than say equity in a publicly traded company.

The maturity date for a bond is the date when the borrower must pay back the full amount borrowed. The amount borrowed is called the bond's face value, and this is typically the amount you initially invested, or lent. The coupon is the interest the issuer must pay on a schedule. Selling a bond before its maturity date usually, but not always, means that you will lose money. Therefore, bonds are considered long-term, buy-and-hold, investments.

Note: Savings bonds do not work the same way as other government or corporate bonds.