A bond is a negotiable certificate that acknowledges the indebtedness of the bond issuer or borrower (debtor) to the holder or lender (creditor). The ownership of the certificate can be transferred. It is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest (the coupon) and to repay the principal at a later date, termed maturity. A bond is a formal contract to repay borrowed money with interest at fixed intervals (semi annual, annual, sometimes monthly).
Bonds provide the borrower with external funds to finance long-term investments, or, in the case of government bonds, to finance current expenditure.