Template:Bond - layman

A bond is like a corporate IOU. To buy a bond is to lend money to the issuing company. In return the company issues you a bond — in the good old days, a security-printed certificate containing the terms of the loan to the company.

The company will pay principal and interest to the “bearer” of a bond — that is, whoever holds it, and who turns up on the correct payment date and presents the bond to the issuer for redemption.

If interest is payable, the bond will have coupons — literally, little perforated tabs that you can tear off and present separately — for each interest payment. Hence the expression "coupon" has become synonymous in modern finance with interest.

Nowadays, bonds all trade electronically, so there are no certificates or coupons, and everything happens in the blink of an eye. but the principal is the same.