Question

Investor F has received a sum of money from his retirement. He wants to invest that sum of money in the securities in which he could have stable earnings for his old age. The expert suggested to invest in long-term bonds of any company for such purpose. Which among the following is the benefit of investing in bonds rather than investing in equity?

a. Bonds could lead to high earnings as compared to equity.
b. Bonds provide a short-term investment option to the investors.
c. Bonds are riskier than other instruments such as common stocks.
d. Bonds could provide a fixed and consistent rate of earning to the investor.

Answer 1

The benefit of investing in bonds rather than equity is a fixed and consistent rate of earning for the investor, providing stability and predictability in terms of earnings.

Step-by-step explanation:

The benefit of investing in bonds rather than investing in equity is that bonds could provide a fixed and consistent rate of earning to the investor. Unlike stocks, which can fluctuate greatly in value and have higher risk in the short term, bonds offer more stability and predictability in terms of earnings.

While stocks may offer higher returns over a long period of time, bonds are a safer investment option, especially for someone near retirement age who wants to ensure stable earnings for their old age.