Final answer:
The two types of claims against an entity's assets are equity claims and debt claims. Equity claims are owed to shareholders, while debt claims are owed to creditors. Banks often purchase bonds as a low-risk form of asset, which represents a debt claim.
Step-by-step explanation:
The two types of claims against the assets of an entity are equity claims and debt claims. Equity claims are from shareholders who own a part of the company and therefore have a residual claim on the assets after debts are paid off. On the other hand, debt claims represent the borrowed funds that the company is obliged to pay back to lenders, such as when a bank issues bonds as part of its assets.
Banks oftenuse the money from deposits to invest in various assets, one of which is bonds. Bonds are a safe investment for banks because they provide a predictable stream of income over time; for example, government bonds are particularly low-risk due to the expectation that the government will honor its debt obligations. Through the issuance of bonds, governments, local authorities, private companies, and nonprofit organizations can borrow money, with banks being the investors.