Debt in simple terms is the money given or taken on interest. Bonds are financial instruments which states terms and conditions of the involved debt amount, interest and tenure.

Fixed deposits, which are known to almost all of us are a kind of bond only which pays interest on capital for a certain time.

The best part of debt is that it is insulated from the performance of an entity and carries a fix return. For example, if a person invests INR 100 in the bond of a company at an interest rate of 5% for one year, then even if the performance or share price of a company goes down by 30%, the investor will still receive his 105.

This is coming from the fact that he is not an investor in the company but has just lend to them. Similar is the case, if the share price appreciates by 30%, then also he will receive his 105 only as was agreed and mentioned in the bond.

This gives a broad classification and definition of a bond and how they differ in their nature from equity.