In finance and economics, a bond or debenture is a debt instrument that obligates the issuer to pay to the bondholder the principal (the original amount of the loan) plus interest. Thus, a bond is essentially an I.O.U. (I owe you contract) issued by a private or governmental corporation. The corporation “borrows” the face amount of the bond from its buyer, pays interest on that debt while it is outstanding, and then “redeems” the bond by paying back the debt.

Bonds are securities but differ from shares of stock in that stock is an ownership interest (termed “equity”), but bonds are merely “debt”: Therefore a stockholder is an owner, but a bond-holder is merely a creditor.

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