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

A bond indenture is indeed the correct answer because it is the formal legal agreement between the bond issuer and the bondholders. This contract outlines the specific terms of the bond issue, including details such as the interest rate, maturity date, rights of the bondholders, and the obligations of the issuer. It serves to protect both parties by clearly defining their responsibilities and expectations.

The bond indenture ensures that bondholders have a clear understanding of their investment, including any covenants—specific conditions that the issuer must adhere to during the life of the bond. This structure reinforces the transparency and legality of the bond transaction, which is crucial for investor confidence.

Other options like a loan agreement, secured note, and bond prospectus serve different purposes in finance. A loan agreement typically pertains to loans rather than bond issues, a secured note involves collateral backing a loan, and a bond prospectus provides investors with essential information about the bond offering but does not constitute a binding contract like a bond indenture does.