Bond
A debt instrument representing a loan from an investor to a borrower.
What is Bond?
A bond is a fixed-income security in which an investor lends money to a borrower — typically a government or corporation — for a defined period at a specified interest rate. The borrower (issuer) promises to pay periodic interest (coupons) and return the principal at maturity. Bonds are used by governments to fund public spending and by corporations to finance operations or expansion. Because bond payments are contractually obligated, bonds generally carry less risk than stocks, though they offer lower long-term returns.
Example
The U.S. Treasury issues 10-year Treasury notes paying a fixed annual coupon. An investor who buys a $10,000 Treasury bond at 4.5% receives $450 per year in interest and receives the full $10,000 back at the end of 10 years. If market interest rates rise after purchase, the bond's market price falls — but the contractual payments remain fixed.
Source: U.S. Treasury — TreasuryDirect