Final answer:
The bond contract, referred to as the Indenture, establishes all the terms between the bondholders and the issuers. It succinctly clarifies the borrowed amount, the repayment amount over time based on the bond's issue date interest rate, and the duration for repayment. The issuer could range from corporate firms to different levels of government.
Step-by-step explanation:
The bond contract, also termed the Indenture, outlines all of the terms of the agreement between the bondholders and the issuing organization. A bond signifies a financial contract in which a borrower, like a corporation, state or federal government, agrees to repay a specific amount it borrowed along with an interest over a specific period in the future. This organization specifies the borrowed amount, the repayment amount which depends on the interest rate at the time the bond was issued, and the time frame for repayment.
For instance, corporate bonds are issued by companies, while city, state, or federal authorities issue municipal, state, and Treasury bonds respectively. Hence, the issuing organization and type of bond vary, but the core principle of a bond contract or indenture remains the same.
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