ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A bond is a debt obligation, like an Iou. Investors who buy corporate bonds are lending money to the company issuing the bond. In return, the company makes a legal commitment to pay interest on the principal and, in most cases, to return the principal when the bond comes due, or matures.

Detailed explanation-2: -Bonds are technically a form of IOU, whereby an individual loans an amount of money to a company or government and is given a contract promising to repay the money with interest by a certain date. Whilst this agreement is sometimes referred to as an “IOU”, it is in fact legally binding.

Detailed explanation-3: -An IOU is a written acknowledgement of debt that one party owes another. In business transactions, an IOU may be followed by a more formal written contract. The informality of the IOU can make it difficult to enforce, and usually impossible to sell or trade.

Detailed explanation-4: -In simple terms, a bond is loan from an investor to a borrower such as a company or government. The borrower uses the money to fund its operations, and the investor receives interest on the investment. The market value of a bond can change over time.

Detailed explanation-5: -abbreviation for I owe you: a written promise to pay back a debt: Here’s an IOU for the fiver you lent me.