amount that it borrowed and also an interest rate over a period of time in the future. A corporate bond is

issued by firms, but bonds are also issued by various levels of government. For example, a municipal bond is

issued by cities, a state bond by U.S. states, and a Treasury bond by the federal government through the U.S.

Department of the Treasury. A bond specifies an amount that one will borrow, the interest rate that one will

pay, and the time until repayment.

A large company, for example, might issue bonds for $10 million. The firm promises to make interest

payments at an annual rate of 8%, or $800,000 per year and then, after 10 years, will repay the $10 million it

originally borrowed. When a firm issues bonds, it may choose to issue many bonds in smaller amounts that

together reach the total amount it wishes to raise. A firm that seeks to borrow $50 million by issuing bonds,
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