The very word bond comes from a commitment or being tied down to a relationship. A bond embodies a debt instrument and the company that issue the bond the bond is the borrower and the investor who invests in the bond is a lender. So in a bond, it is basically a lender / borrower relationship that gets created. A bond is a debt instrument that provides a periodic stream of interest payments to investors while repaying the principal sum on a specified maturity date. That is what makes bonds attractive to a lot of conservative investors. Unlike equity, there is no uncertainty over cash flows as the payment of interest and the repayment of principal is a commitment that the bond issuer gives to the investor or the lender. A bond’s terms and conditions are contained in a legal contract between the buyer and the seller, known as the indenture. As an investor it is very important that you go through the fine print of the indenture or the credit agreement so that you are fully aware of the ups and downs of the contract.