What is the legal contract that outlines the terms of a bond called?

The legal contract that outlines the terms of a bond is referred to as an indenture. This document establishes the specific terms under which the bond is issued, including the interest rate, maturity date, the rights of bondholders, and the obligations of the issuer. An indenture serves as a protective measure for both the issuer and the investor, ensuring that all parties have a clear understanding of their rights and responsibilities under the bond agreement.

In addition to specifying the basic features of the bond, the indenture may also include covenants, which are clauses that impose certain conditions or restrictions on the issuer to protect bondholders' interests. It's important to recognize that while covenants are a component of the overall legal agreement, they do not constitute the entirety of the bond contract itself, which is the indenture.

Collateral refers to an asset pledged by the borrower to secure a loan or bond, and while it may be referenced in an indenture, it does not describe the contract as a whole. An affidavit is a written statement confirmed by oath, used in legal proceedings, and does not pertain to bonds or their terms. Thus, the indenture is the comprehensive legal document that encompasses the entire framework for the bond, making it the correct answer.