16
QuizMultiple Choice

Investing and Financial Markets — Unit test

Question 16 • Personal Finance - EL3403

Bonds are considered to offer a guaranteed return, as they must be honored by law, but which is still a potential risk that investors face?

Answer
A
The issuer may not raise enough capital.
B
The issuer could refuse to pay dividends.
C
The issuer could go bankrupt.
D
The issuer may not make a profit.

Explanation

Bond issuers are legally obligated to make scheduled interest and principal payments, but that obligation does not guarantee they will be able to pay. If the issuer goes bankrupt, investors may not receive all the money owed to them. Therefore, the potential risk is that the issuer could go bankrupt.

AI-written and checked against the verified answer.

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