Which statement about bonds is accurate?

Which statement about bonds is accurate?

• A. Stocks represent equity ownership.
• B. Bonds are equity investments with variable yields.
• C. Bonds are debt obligations typically paying fixed interest and returning principal at maturity.
• D. Bonds are used to fund share buybacks.

Answer: (C)

Bonds are debt instruments issued by governments, municipalities, or corporations to borrow money. They typically offer a fixed interest payment (a coupon) over the life of the bond and the principal is returned at maturity. This combination—being a loan to the issuer with predictable cash flows in the form of regular coupons and a set repayment of the face value at the end—defines bonds as fixed-income investments. This distinguishes them from stocks, which represent ownership in a company and may deliver dividends that aren’t guaranteed. The statement about bonds being funding instruments with fixed payments and principal repayment at maturity is the accurate description, while the other options mix in incorrect roles or characteristics for bonds.

Bonds are debt instruments issued by governments, municipalities, or corporations to borrow money. They typically offer a fixed interest payment (a coupon) over the life of the bond and the principal is returned at maturity. This combination—being a loan to the issuer with predictable cash flows in the form of regular coupons and a set repayment of the face value at the end—defines bonds as fixed-income investments.

This distinguishes them from stocks, which represent ownership in a company and may deliver dividends that aren’t guaranteed. The statement about bonds being funding instruments with fixed payments and principal repayment at maturity is the accurate description, while the other options mix in incorrect roles or characteristics for bonds.