How do bonds generate income for investors?

Students were enquired to answer a question at schools and to mention what is most important for them to succeed. One that response stood out from the rest was practice. Successful people definitely not born successful; they become successful by just hard work and dedication. If you would like to attain your goals, keep this in mind! just below are one of the answer and question example that you can certainly work with to practice and further enhance your understanding and also give you insights that might just guide you to sustain your study in school.

Question:

How do bonds generate income for investors?A. Bonds depreciate in value.
B. Bonds protect investors from bankruptcy.
C. Bonds pay interest to the bank that sold the bond.
D. Bonds pay a specified amount to the investor at maturity.

Answer:

Bonds generate income for investors: B. Bonds protect investors from bankruptcy.

  • Bonds are considered to be safer investments as compared to the stocks because the bondholders can claim on the money generated by deposition of bonds in the event of bankruptcy. It becomes one of the source of income in scarcity of money.
  • Bonds depreciates in value with time. The value of the bond reduces with as that of its face value.
  • Bonds pay principle interest to the bond holder rather than to the bank.
  • There is no surety of getting a specified amount after the maturity of bond as the value of bond depreciates with the time.

Hence, option B is correct.

Learn more about bonds:

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From the answer and question examples above, hopefully, they might guide the student take care of the question they had been looking for and take notice of the whole thing stated in the answer above. Then can make some sharing in a group discussion and also study with the classmate related to the topic, so another student also have some enlightenment and still keeps up the school learning.

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