Bond

A bond is a debt security similar to an IOU. Borrowers issue bonds to raise money from investors willing to lend them money for a certain time.When you buy a bond, you lend it to the issuer, a government, municipality, or corporation. In return, the issuer promises to pay you a specified interest rate during the bond's life and to repay the principal, also known as the face value or par value of the bond, when it "matures" or comes due after a set period [Investor]. Bonds are debt instruments and represent loans made to the issuer. Governments (at all levels) and corporations commonly use bonds to borrow money. Governments need to fund roads, schools, dams, and other infrastructure. The sudden expense of war may also demand the need to raise funds. Similarly, corporations will often borrow to grow their business, buy property and equipment, undertake profitable projects for research and development, or hire employees. The problem that large organizations run into is that they typically need far more money than the average bank can provide. Bonds provide a solution by allowing many individual investors to assume the role of the lender. Indeed, public debt markets let thousands of investors lend a portion of the needed capital. Moreover, markets allow lenders to sell their bonds to other investors or to buy bonds from other individuals—long after the original issuing organization raised capital [Investopedia].