Can someone explain what a bond is?

I was always under the impression that a bond was certificate proving debt but someone said that it has more to do with loans, not debts and now I am confused and don't fully understand what it is. Can someone explain to me in the simplest way possible so I get an idea of what a bond is?

Facebook Twitter LinkedIn Telegram Whatsapp Pocket
May 13, 2020 11:58 PM

Member

A bond is a fixed income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental). A bond could be thought of as an I.O.U. between the lender and borrower that includes the details of the loan and its payments. Bonds are used by companies, municipalities, states, and sovereign governments to finance projects and operations. Owners of bonds are debtholders, or creditors, of the issuer. Bond details include the end date when the principal of the loan is due to be paid to the bond owner and usually includes the terms for variable or fixed interest payments made by the borrower.


Source: https://www.investopedia.com/terms/b/bond.asp


In other words, it has to do with loans and debt. If someone holds a bond over someone else, they have debt to claim.

May 16, 2020 12:51 AM