Which instrument is a loan to a company or government that pays you back with interest?

Prepare for the NGPF Personal Finance – Investing Test with multiple choice questions, hints, and explanations. Boost your financial literacy and investment skills. Get exam-ready!

Multiple Choice

Which instrument is a loan to a company or government that pays you back with interest?

Explanation:
The concept is a debt security: you lend money to a borrower in exchange for regular interest payments and the return of the principal at a set date. A bond fits this exactly—you buy a bond and the issuer (a company or government) pays you interest over time and then repays the initial amount when the bond matures. This is different from owning stock, which gives you a stake in a company and potential dividends, or from capital gains, which come from selling an asset at a higher price than you paid.

The concept is a debt security: you lend money to a borrower in exchange for regular interest payments and the return of the principal at a set date. A bond fits this exactly—you buy a bond and the issuer (a company or government) pays you interest over time and then repays the initial amount when the bond matures. This is different from owning stock, which gives you a stake in a company and potential dividends, or from capital gains, which come from selling an asset at a higher price than you paid.

More Multiple Choice Questions
Subscribe

Get the latest from Passetra

You can unsubscribe at any time. Read our privacy policy