Question

Marlon wants to save money over a long period of time. He does not need to have easy access to the money, and he is worried about losing his investment. He would like to know the interest rate up front. Which of the following options would best suit his needs

Answer 1

The correct answer is letter "A": Bonds.

Step-by-step explanation:

Bonds are securities that pubic traded companies issue as debt instruments with a promise of repayment of the principal plus interest. Just like stocks, bonds allow companies to pool money useful for investment but bonds are less-risky assets since the profits investors obtain from it are based on a fixed interest rate.

The investor must wait until the maturity date of the bond to collect the total revenue but has the option of selling the bond before for a smaller profit. Therefore, because of the mentioned above Marlon should invest in bonds.

Answer 2

Bonds are the best option for Marlon.

Step-by-step explanation:

As we know that Bonds are less riskier because the interest is paid first to bonds holders, then if profit is left the tax is paid to tax authorities. Now again the profit paid is to preference sharesholders and still their profit left then the company pays dividends to shareholders and retain the profit left. This means that bonds are best options here and the coupon rate is always available which satisfies the needs of Marlon.