Final answer:
Bonds do not generate income for investors through dividends. So, the correct option is d. Bonds pay dividends.
Step-by-step explanation:
Bonds are debt securities where investors loan money to an entity in exchange for regular interest payments and eventual return of the principal amount at maturity. While bonds pay interest and often appreciate in value over time, they do not provide income to investors through dividends. Dividends are typically associated with stocks, representing a portion of a company's profits distributed to shareholders.
When investors purchase bonds, they receive periodic interest payments throughout the bond's life. These interest payments serve as the primary source of income from owning bonds, differing significantly from stocks that may provide income through dividends. Bonds' value may fluctuate in response to changes in interest rates, credit quality, and market conditions, affecting their market price but not generating income through dividends.
The absence of dividends in bonds stems from their structure as debt instruments rather than ownership stakes in a company. While stocks offer ownership in a corporation, entitling shareholders to dividends based on company profits, bonds operate under a loan-like agreement, offering interest payments and the return of principal upon maturity but not direct income through dividends.
In summary, bonds do not generate income for investors via dividends, distinguishing them from stocks, which often provide income through dividends based on a company's profits and shareholders' ownership. Instead, bond investors rely on interest payments and potential appreciation in bond value as their primary sources of return.
So, the correct option is d. Bonds pay dividends.