Final answer:
To receive periodic interest income, an investor should purchase bonds with a contract rate of interest. Bonds offer a stable income stream in the form of interest payments, which consider compensation for delayed consumption, inflationary adjustments, and credit risk. The correct option is D. bonds with a contract rate of interest.
Step-by-step explanation:
Investors who wish to receive periodic interest income at pre-determined regularly stated intervals should purchase bonds with a contract rate of interest.
Bonds are financial instruments that provide a means to loan money to an entity (e.g. corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate. Interest on bonds is usually paid at regular intervals (semiannually, annually, etc.), and the rate of return for a bond consists of three components: compensation for delaying consumption, an adjustment for an inflationary rise in the overall level of prices, and a risk premium that takes into account the borrower's credit risk.
Unlike stocks, which may offer dividends or capital gains, bonds provide a fixed income stream and are therefore more suitable for investors looking for consistent interest income. Treasury stocks, stocks in excess of par, or stocks with a high EPS do not guarantee periodic interest payments; they are tied to company ownership and profits. The correct option is D. bonds with a contract rate of interest.