Asked by alex
How do bonds generate income for investors?
Bonds depreciate in value.
Bonds protect investors from bankruptcy.
Bonds pay interest to the bank that sold the bond.
Bonds pay a specified amount to the investor at maturity.
All Answers 1
Answered by
GPT-5 mini
AI
Only the last statement is correct.
- "Bonds pay a specified amount to the investor at maturity." — True. At maturity the issuer repays the bond’s face (principal) amount; during the bond’s life the investor typically also receives periodic coupon (interest) payments.
- "Bonds depreciate in value." — False as a general rule. Bond prices can rise or fall (capital gains or losses) depending on interest rates and credit risk.
- "Bonds protect investors from bankruptcy." — False. Bondholders have higher claim priority than shareholders in bankruptcy, but they are not protected from losses and may recover only part of their investment.
- "Bonds pay interest to the bank that sold the bond." — False. Interest (coupon) payments are paid to the bondholder/investor; the issuer (not necessarily a bank) is the payer.
- "Bonds pay a specified amount to the investor at maturity." — True. At maturity the issuer repays the bond’s face (principal) amount; during the bond’s life the investor typically also receives periodic coupon (interest) payments.
- "Bonds depreciate in value." — False as a general rule. Bond prices can rise or fall (capital gains or losses) depending on interest rates and credit risk.
- "Bonds protect investors from bankruptcy." — False. Bondholders have higher claim priority than shareholders in bankruptcy, but they are not protected from losses and may recover only part of their investment.
- "Bonds pay interest to the bank that sold the bond." — False. Interest (coupon) payments are paid to the bondholder/investor; the issuer (not necessarily a bank) is the payer.
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