Final answer:
A bid bond is a type of bond used in business to assure that a contractor will adhere to their bid; it is part of a range of financial contracts utilized to raise capital.
Step-by-step explanation:
A contractor in need of a bid bond to obtain a contract is an example of utilizing a bond in business transactions. A bid bond ensures that the contractor will enter into the contract at the bid price and provides the project owner with protection against the contractor failing to fulfill their obligations. Bonds are financial agreements where a borrower agrees to repay the borrowed amount with interest over a future period. A corporate bond, for instance, allows a firm to raise capital by promising to pay back the bond's principal along with interest, making anyone who owns a bond a bondholder. If a firm cannot make the promised interest payments, bondholders have the right to take legal action, although recovery is not guaranteed if the firm lacks sufficient assets.