A bond is a financial instrument used by entities such as corporations or governments to raise funds. When you purchase a bond, you are essentially lending money to the issuer of the bond. In return, the issuer pays interest—called the coupon—over the term of the bond and repays the principal amount on the bond’s maturity date. Bonds are a common way for organizations to finance new projects, maintain ongoing operations, or refinance existing debts.

There are various types of bonds, including government bonds, municipal bonds, and corporate bonds. For example, a government may issue bonds to fund infrastructure projects. Bonds can also be traded in the open market, where their prices can fluctuate based on interest rates. Example: "The company issued 10-year bonds at a coupon rate of 5% to finance its expansion." Bonds are often considered a safer investment compared to stocks, but they still carry risks such as default risk and interest rate risk.