A(n) is a financial instrument that obligates a borrower to repay money with interest to a lender (which may be a government municipality or corporation).

A bond is a financial instrument that obligates a borrower to repay money with interest to a lender, which may be a government, municipality, or corporation. When an entity, such as a corporation or government, needs to raise funds, it can issue bonds as a way to borrow money.

Investors purchase these bonds as a way to earn interest income. The bond itself represents a loan made by the bondholder to the issuer. Each bond has a specific maturity date, at which point the principal amount (the face value of the bond) is repaid to the bondholder, along with any accrued interest. The interest paid on bonds, known as the coupon, can occur at regular intervals until maturity, providing a predictable revenue stream for investors.

Bonds can vary in terms of risk and return, with some bonds considered safer investment options, such as government bonds, while others, like corporate bonds, may offer higher yields but come with increased risk. Overall, bonds are essential tools in the financial markets, facilitating borrowing and investment activities.