Which term describes a debt instrument issued to raise capital by a government or corporation, with a pre-set interest rate?

Which term describes a debt instrument issued to raise capital by a government or corporation, with a pre-set interest rate?

• A. Bond
• B. Stock
• C. Mutual Fund
• D. ETF

Answer: (A)

A bond is a debt instrument issued by a government or corporation to raise capital and typically carries a fixed coupon, or pre-set interest rate, paid to the investor at regular intervals until the principal is repaid at maturity. This structure—borrowing money now with a promise to pay fixed interest and return the principal later—is what defines a bond. Stocks represent ownership in a company and do not come with guaranteed fixed payments or a maturity date. Mutual funds and ETFs are investment vehicles that hold a mix of assets, and while they can include bonds, they themselves are not single debt instruments with a fixed interest rate.

A bond is a debt instrument issued by a government or corporation to raise capital and typically carries a fixed coupon, or pre-set interest rate, paid to the investor at regular intervals until the principal is repaid at maturity. This structure—borrowing money now with a promise to pay fixed interest and return the principal later—is what defines a bond.

Stocks represent ownership in a company and do not come with guaranteed fixed payments or a maturity date. Mutual funds and ETFs are investment vehicles that hold a mix of assets, and while they can include bonds, they themselves are not single debt instruments with a fixed interest rate.