A bond is simply an I.O.U for a loan made by an investor to a borrower, which is typically a corporation or government body. The bond is a mechanism to document the details of the loan and its payments, including when the principal of the loan is due back to the bondholder (known as the maturity date) and repayment terms (i.e., 5% quarterly payments).

Bonds are a lower cost option used by companies to raise money for their operations or growth.