Which of the following best illustrates why a bond is a type of loan?

Question

Quizplus · Accepted Answer

When an investor buys a bond from an issuer, the investor is essentially lending money to the issuer with the assurance that it will be repaid at a future date. This is the basic structure of a loan, where the lender provides funds to the borrower who agrees to pay back the principal plus interest over time. Therefore, the fact that bondholders receive regular interest payments and a promise of repayment in the future means that bonds are a form of loan. Choice A is true but does not fully capture the nature of a bond as a loan. Choice B is incorrect as bondholders do not become part owners of the issuing company. Choice C is true but does not specifically highlight the loan aspect of bonds.

Which of the Following Best Illustrates Why a Bond Is