How is a bond best described?

A bond is best described as a fixed-income instrument that involves lending money to a borrower, typically a corporation or government entity, in exchange for periodic interest payments and the return of the bond's face value when it matures. This characteristic defines bonds as debt instruments; unlike owning stocks, which represent ownership in a corporation, bonds do not confer ownership rights to the lender. Instead, the bondholder is essentially a creditor to the issuer, receiving fixed interest payments over the life of the bond.

This mechanism underscores the concept of fixed income. The return on bonds is usually more predictable compared to stocks, with set maturity dates and known interest rates, making them a less risky investment relative to equities in many cases. In contrast to the other options, which either reference characteristics of stocks or real estate investments, the description of bonds as fixed-income instruments lending money accurately captures their fundamental nature within financial markets.