A bond is a loan made by an investor to a borrower (the issuer). The issuer promises to pay periodic interest and return the principal at maturity.

Key terms: - Par value (face value): The amount repaid at maturity — typically $1,000 per bond. - Coupon rate: Annual interest rate expressed as % of par. A 5% coupon on $1,000 par = $50/year. - Maturity: The date when the issuer repays the principal. - Issuer types: - Government bonds (Treasuries): Backed by the full faith of the U.S. government. Lowest default risk. Examples: T-Bills (< 1yr), T-Notes (2–10yr), T-Bonds (20–30yr). - Corporate bonds: Issued by companies. Higher yield than Treasuries to compensate for credit risk. - Municipal bonds (munis): Issued by states/cities. Interest is often tax-exempt at the federal level — advantageous for high-income investors.

Example: Apple issues a 10-year corporate bond with $1,000 par and a 4% coupon. You receive $40/year for 10 years, then $1,000 back at maturity.