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A bond is simply an IOU. It is an agreement under which a sum is repaid to an investor after an agreed period of time.
A bond can be issued by anyone but is usually issued by governments (see gilts ) or public companies to repay money borrowed.
These loans normally repay a fixed rate of interest over a specified time and also repay the original sum at par in full after an agreed period - when the bond matures.
Last Updated: May 2007 © Moneyextra.com
Our senior editor Robin Amlôt recommends you should consider taking independent financial advice before acting on any article. Please contact us for help with your individual circumstances if any assistance is required.