Final answer:
Bonds are promises by the borrower to return the borrowed amount with interest, issued by entities like corporations, cities, states, and the federal government.
Step-by-step explanation:
Bonds are formally defined as a promise by the borrower to pay back the lender a specified amount of money, with interest, within a specified period of time. A bond is a financial contract through which a borrower like a corporation, a city or state, or the federal government agrees to repay the amount that it borrowed and also a rate of interest over a period of time. There are various types of bonds such as corporate bonds, issued by firms; municipal bonds, issued by cities; state bonds by U.S. states, and Treasury bonds by the federal government through the U.S. Department of the Treasury.