Final answer:
Positive aspects of bonds include low risk and moderate liquidity. Bonds offer a lower to moderate rate of return, which accounts for time preference, inflation, and the risk premium for the borrower's creditworthiness. Unlike stocks, bonds do not give residual ownership or high dividends but provide a safer investment with regular interest payments.
Step-by-step explanation:
Positive aspects of bonds include their relatively low risk compared to other investments such as stocks. A bond is a debt security, in which the bond issuer owes the holders a debt and is obliged to pay them interest and/or to repay the principal at a later date, termed the maturity date. The rate of return on bonds can be described as low to moderate, which reflects both the compensation for delaying consumption and adjustments made for inflationary increases and borrower's risk. While bonds do not offer residual ownership or typically deliver high dividends like stocks, they are considered a safer investment and can provide steady income through interest payments.
The risk associated with bonds is generally low to moderate and depends upon changes in the economy's interest rates after the bond is issued. As a result, the bottom line for bonds indicates that they have a modest rate of return but are favored for their risk profile and investment liquidity, which is considered moderate, as the bond can usually be sold before maturity if the investor needs to access their cash.