Government bonds

Government bonds involve lending an amount of money to the government for a specified timeframe and the issuing government will commit to pay you an interest amount, most commonly referred to as the coupon rate.

If you hold this investment to maturity (the specified timeframe) you will receive your capital and your coupon (interest) on the investment. Depending on the bond, you may also receive coupon payments during the year as well as on maturity.

So if you invested $1,000 in a government bond for 12 months with a coupon rate of 3% pa, you will receive $1,030 at maturity ($1,000 + $30 interest).