Final answer:
Bonds are loans to entities that pay interest over time and are considered a low-risk investment option, with government bonds being particularly stable because governments are likely to fulfill their repayment obligations. The correct answer is option B.
Step-by-step explanation:
Bonds are loans to a company or government for a set amount of time. They are considered low-risk investments because they earn interest and the entity issuing the bond is expected to pay back the principal, which is the initial amount invested, along with interest at set intervals. This feature makes bonds a reliable source of income, especially when they are issued by stable governments like that of the U.S. Government bonds are particularly low-risk because the government is very likely to repay its debts. While mutual funds, stocks, and derivatives are other types of investments, bonds are unique in that they provide a level of security and predictability that is valued by investors, including banks, which may hold them as assets and benefit from their steady stream of payments over time.