The correct option is (A).
A bond typically pays a fixed, predictable amount of interest each year.
Further Explanation:
Stock: The stock represents the individual ownership interest in the company.
Bond: The bond is a long-term debt which the company promises to pay with interest to their bondholders.
• A bondpays a fixed amount of interest each year, and the amount is predictable; also, the bondholders get the benefit of interest to be paid first if the company is in loss also.
• Stocks are unstable, volatile in nature, and their value changes often. And their dividends are also unpredictable.
• Bonds can be issued by many different entities or companies. But this option does not make any sense regarding the lower-risk investment of the bond than the stock.
• Well-established company stocks do not mean that they will pay dividends to their investors. The company might retain profits and can invest the amount in the future.
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Answer Details:
Grade: High school
Chapter: Stocks and bonds
Subject: Business studies
Keywords: Why is a high-quality bond typically considered a lower-risk investment than stock, a bond typically pays a fixed, predictable amount of interest each year, stocks are stable and do not change often, bonds are issued by many different entities, well-established company stocks pay dividends to their investors.
