• Long-term debt instrument used by business and government to raise large sums of money, generally from a diverse group of lenders. In the case of business bond issuers, a specific asset or assets are pledged as collateral.
• A bond is essentially a loan made by an investor to a division of the government, a government agency, or a corporation. The bond is a promissory note to repay the loan in full at the end of a fixed time period. The date on which the principal must be repaid is the called the maturity date, or maturity. In addition, the issuer of the bond, that is, the agency or corporation receiving the loan proceeds and issuing the promissory note, agrees to make regular payments of interest at a rate initially stated on the bond. Interest from bonds is taxable based on the type of bond. Corporate bonds are fully taxable, municipal bonds issued by state or local government agencies are free from federal income tax and usually free from taxes of the issuing jurisdiction, and Treasury bonds are subject to federal taxes but not state and local taxes. Bonds are rated according to many factors, including cost, degree of risk, and rate of income.
• A formal certificate of debt, issued by corporations or units of government.
• A legal obligation of an issuing company or government to repay the principal of a loan to bond investors at a specified future date. Bonds are usually issued with a Par or face value of $1,000, representing the amount of money borrowed. The issuer promises to pay a percentage of the par value as interest on the borrowed funds. The Interest payment is stated on the face of the bond at issue.
• Bonds are debt and are issued for a period of more than one year. The U.S. government, local governments, water districts, companies, and many other types of institutions sell bonds. When an investor buys bonds, he or she is lending money. The seller of the bond agrees to repay the principal amount of the loan at a specified time. Interest-bearing bonds pay interest periodically.
• The term bond refers to the long-term debt of companies or governments.