Economics Homework Help

A bond is like a fancy IOU between a borrower and an investor. Imagine you lend your friend 100 dollars, and they promise to pay you back with a little extra—say 10 dollars at a later date. That's a simple version of a bond. In the world of finance, a bond is an official debt agreement where a government, company, or municipality borrows money from investors (the bondholders) for a set period at a fixed or variable interest rate. In return, the borrower promises to repay the original amount (called the face value) plus interest over time, like a loan with extra perks. Bonds help fund major projects—think schools, roads, and businesses—while giving you an opportunity to earn a steady return on your investment.

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