Which best explains how bondholders and banks serve a similar function?

Question

Responses

both take deposits and issue withdrawals

both take deposits and issue withdrawals

both are required to reserve certain assets

both are required to reserve certain assets

both are holders of someone else's debt

both are holders of someone else's debt

both have to charge government-determined interest rates

Answer 1

The best explanation of how bondholders and banks serve a similar function is:

both are holders of someone else's debt.

Bondholders lend money to issuers (such as corporations or governments) in exchange for interest payments and the return of the principal at maturity, while banks lend money to borrowers and receive repayments with interest. In both cases, they are essentially holding debt that someone else owes them.