A bond is a fixed-income investment representing a loan made by an investor to a borrower, typically a government, corporation, or municipality. When you buy a bond, you are lending money to the issuer, who agrees to pay you interest (called the coupon) at fixed intervals and to repay the principal (the original loan amount or face value) at a specified maturity date

. Bonds serve as a way for issuers to raise capital for various purposes such as funding infrastructure projects, business expansion, or government operations. Bondholders are creditors of the issuer, meaning they have a claim to repayment before stockholders in case of bankruptcy

. Key features of bonds include:

• Face value (par value): The amount the issuer agrees to repay at maturity.
• Coupon rate: The fixed interest rate paid to bondholders periodically.
• Maturity date: The date when the principal is repaid.
• Credit risk: The risk that the issuer might default on payments.
• Interest rate risk: Bond prices inversely fluctuate with changes in market interest rates

Bonds can be traded on secondary markets before maturity, allowing investors to buy or sell bonds at market prices that may differ from the face value

. In summary, a bond is essentially a formal IOU where the investor lends money to an issuer in exchange for regular interest payments and the return of principal at maturity