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Bond

Bond

A bond is a fixed-income security that is issued by a borrower, usually a government or a company, to an investor in exchange for the loan of money. It is an IOU, or promissory note, from the borrower to the lender outlining the terms and conditions of the loan. The bond includes details such as the amount of money to be borrowed, the length of the loan term, the date the loan is to be repaid, interest rate on the loan, and what the borrower is required to do if the terms of the loan are not met. Bond investors provide capital to the borrower, typically in return for regular payments of interest. The interest income received from the bond is the investor’s return on the loan. Bonds may also be used for capital projects or to finance government and corporate operations. Bondholders sometimes have a legal claim on the borrower’s assets or income before other creditors in the event of default. Bondholders are the debtholders of the issuing entity.

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