Bond (finance)

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A bond is a contract between two companies.

Companies or governments issue bonds because they need to borrow large amounts of money. They issue bonds and investors buy them (thereby giving money to the people who issued the bond).

Bonds have a maturity date. This means that at some point, the bond issuer has to pay back the money to the investors. They also have to pay the investors a little bit more than they paid for the bond. Bonds are used to keep the company running smooth when needed, and can be used as protection if their stock drops drastically.

Bonds are usually traded through brokers and are part of a financial instrument group called Fixed Income. Banks and financial institutions offer loans on different terms against the security of assets.

Simply put, a bond is a receipt given by a government or organization as an agreement to borrow money from another organization which will be returned at a later date with certain amount of interest or increment.