What is the primary purpose of a bond?

The primary purpose of a bond is to raise capital through loans. This financial instrument represents a loan made by an investor to a borrower, typically a corporation or government. When an entity issues a bond, it is essentially borrowing funds from bondholders with the promise to pay back the principal amount at a specified maturity date, along with periodic interest payments, known as coupon payments. This mechanism allows issuers to secure the necessary capital to fund projects, manage costs, or refinance existing debt, making it a crucial element in the financial system for both issuers and investors.

The other options represent different financial instruments or activities. Dividends are associated with stocks, where shareholders receive a portion of a company's profits. Equity in a company is obtained through the purchase of stocks, which provide ownership rather than debt obligations. Trading for goods and services pertains to the use of currency or other bartering methods, which is outside the scope of what bonds are designed for. Thus, raising capital through loans is the most accurate description of a bond's primary purpose.