In finance a bond is a debt security in which the authorized issuer owes the holder a debt and, depending on the terms of the bond, is obliged to pay interest (the coupon) and/or to repay the principal a a later date, termed maturity. A bond is a formal contract to repay

borrowed money with interest at fixed intervals. Thus a bond is like a loan: The issuer is the borrower, the holder is the lender, and the coupon is the interest. Bonds provide the borrower with external funds to finance long-term investments, or, in the case of government bonds, to finance current expenditure. Bonds must be repaid a fixed intervals over a period of time. Bonds and stocks are both securities, but the major difference between the two is that stockholders ave an equity stake in the company (i.e. they are owners), whereas bondholders have a creditor stake in the company (i.e.they are lenders)