What do bonds represent in financial terms?

Bonds represent a loan made by an investor to a borrower, typically a corporation or government. When an investor purchases a bond, they are essentially lending their money to the issuer of the bond in exchange for periodic interest payments and the return of the bond's face value at maturity. This relationship establishes a debt obligation, where the issuer is required to pay back the principal plus interest, which compensates the investor for the use of their funds over time.

In contrast, ownership in a company relates to equity investments, where investors hold shares and have a claim on the company's assets and earnings. Fixed deposit accounts are a different type of financial product offered by banks that provide a fixed interest rate over a specified term, and are not the same as bonds. Equity investments involve taking ownership stakes in companies, which is fundamentally different from being a creditor through bonds. Understanding bonds as a debt instrument distinguishes them from other financial instruments that involve ownership or deposits.