Bond (finance)

A bond is a contract between two parties (companies or government.)

Companies or governments issue bonds because they need to borrow large amounts of money. They issue bonds and investors buy them (so giving money to the people who issued the bond).

Bonds have a maturity date. This means that at some point, the bond issuer has to pay back the money to the investors. They also have to pay the investors a bit more than they paid for the bond. Bonds are used when needed to keep the company running smoothly. It is protection if their stock drops drastically.

Bonds are usually traded through banks and other financial entities and are part of a financial instrument group called Fixed Income. Banks and financial institutions offer loans on different terms against the security of assets.

Simply put, a bond is a receipt given by a government or organization as an agreement to borrow money from another organization which will be returned at a later date with certain amount of interest or increment.