A bond in every respect is an instrument of credit. It possesses practically all the features of a time note, for it is a promise by the maker to pay interest and principal at a designated time in the future. It is a promise written in a formal manner, for it is always under seal. As the bond may have a maturity as long as one hundred years, the maker is usually a government or a corporation, for neither an individual nor a partnership could have this expectancy of life. As the amount of the loan may aggregate millions of dollars, it is obviously impossible to borrow the entire sum from one person, and so it is divided into smaller denomina-tions, usually of $1,000, $500, and $100 for each bond. It also bears a fixed rate of interest which is generally payable semiannually.

The bond, the same as any other promissory note, may be either secured or unsecured. The first type is secured by a mortgage in which the corporation conveys property to a trustee, who may take steps to sell it for the benefit of bondholders if the interest or principal is not paid. The corporation may thus pledge property such as terminals, factories, or stocks and bonds. The unsecured or, as it is usually called, the debenture bond, is based upon no tangible assets, but rests merely upon the general credit standing of the corporation. In the event of default, holders of such bonds cannot foreclose on any special assets of the corporation, for their only redress is to bring suit as creditors on notes which have been unpaid, and so dishonored.

The degree of negotiability of a bond depends on whether or not it is registered. A registered bond is payable only to the party whose name is designated on the instrument and recorded on the books of the corporation. It can be transferred only by the indorsement of the payee and by the recording of this assignment on the ledgers of the corporation or its agents. While the registered bond is thus difficult to negotiate, this very feature may prove advantageous in case of loss or theft, for payment could then be made only by forging the owner's name. The unregistered bond is more readily transferred, since it is payable to bearer and is therefore negotiable merely by delivery. Interest on the registered bond is paid directly to the party specified, while in the case of the unregistered bond this disbursement is given to any holder of the coupons attached to the instrument, and so it is usually called a coupon bond. Bonds may be registered as to principal and also as to interest. The coupon itself may be regarded as a promissory note in which the corporation agrees to pay the holder the interest.