Companies and governments issue bonds to fund their day-to-day operations or to finance specific projects. When you buy a bond, you are loaning your money for a certain period of time to the issuer, be it McDonalds or Uncle Sam.

In exchange, the borrower promises to pay you interest every year and to return your money at "maturity," when the loan comes due, or at "call" if the bond is of the type that can be called earlier than its maturity . The length of time to maturity is called the "term."

A bond's face value, or price when issued, is known as its "par value." Its interest payment is known as its "coupon."

A $1,000 bond paying 8 percent a year has a $80 coupon. Expressed another way, its "coupon rate" is 8 percent. If you buy the bond for $1,000 and hold it to maturity, the "yield," or actual earnings on your investment, is also 8 percent (coupon rate divided by price = yield).

The prices of bonds change throughout the trading day as, of course, do their yields. But the coupon payments stay the same.

Suppose you don't buy the bond right at the offering, and instead buy from someone else in the "secondary" market. If you buy the bond for $1,100 in the secondary market, though, the coupon will still be $80, but the yield is 7.2 percent because you paid a "premium" for the bond.

For a similar reason, if you buy it for $900, its yield will be 9 percent because you bought the bond at a "discount." If its current price equals its face value, the bond is said to be selling at "par."

The bottom line: There are many ways of expressing a bond's return, but "total return" is the only one that really matters. This includes all the money you earn off the bond: the annual interest plus the gain or loss in market value, if any.