8
QuizMultiple Choice

Investing and Financial Markets

Question 8 • Personal Finance - EL3403

How do bonds generate income for investors?

Answer
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.

Explanation

A bond generates income by paying the investor interest, often at regular intervals, and returning its principal when it matures. Of the choices, D is the closest: it describes the specified payment the investor receives at maturity. Bonds do not necessarily protect investors from bankruptcy, and interest is paid to the bondholder, not the bank that sold the bond.

AI-written and checked against the verified answer.

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