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A bond is a loan you make to an institution. You can make the loan to the government, a state, and a local municipality or to a company. Companies and Governments need this money to finance projects like new buildings and roads. When you lend money to the institution, the IOU (I Owe You) they give you is called a bond. This IOU is their promise to repay both your principal (the amount you lend) and a fixed amount of interest for allowing them to borrow your money.
As a bond investor, you have many choices that you may not even be aware of: