How do bonds make us money?

There are 2 ways

1. It can be held and receive money via the bond yield. Something like dividend yield for stocks.

2. Trades on the bond market like other assets. Some bond ETFs include. TLT, HYG and LQD.

Hello :)

A bond by definition is a loan. It is issued by a firm or country.

When the firm/country issues a bond, the firm/country is essentially borrowing money when an investor buys the bond. The investor is the lender. The firm/country is the borrower.

In return, the investor receives coupons at a rate determined by the bond (~5%p.a. in your example). When the bond matures, the investor receives back the principal from the firm/country.

At a deeper level, the investor has the option to sell the bond in the open market instead of holding it to maturity. Bond prices fluctuate according to market forces — although much lesser than stock prices

One of the main determinates of bond prices is the interest rate. When the interest rate rises, bond prices fall, and vice versa.

So, to answer your question, the main way bonds work as a "money-making tool" is from the coupons received from the bond. Take note: there are many different types of bonds with varying attributes such as call provision and liquidation preference.