Option (B) is correct. When a person buys a bond, then that person is loaning the money to an organization.
Further Explanation:
Bond: Bond is a financial instrument that is used for raising the funds from the outside of the entity. The bond is a loan agreement between the issuer and the bondholder where the issuer borrows the funds from the bondholder. The issuer has to pay the principal and the interest on the bond to the bondholder. Bond has a maturity date on which the issuer has to pay the principal (borrowed funds). Generally, the issuer pays the interest on the bond during the tenure of the bond.
Therefore, when a person buys a bond, that person is loaning the money to an organization.
A.
Stock: This is an incorrect option.
Stock signifies the ownership in the company. It is not a loan.
B.
Bond: This is the correct option.
Bond is a loan provided by the bondholder to the issuer of the bond.
C.
Mutual fund: This is an incorrect option.
A mutual fund is an investment in various companies in a small fraction. It is a combination of debt and equity.
D.
Index fund: This is an incorrect option.
The index fund is a type of mutual fund so it cannot be considered as a loan.
Learn more:
1. Learn more about the ideal type of loan for students
https://brainly.com/question/1242264
2. Learn more about the mortgage payment
https://brainly.com/question/3073010
3. Learn more about the due amount of bond
https://brainly.com/question/6167345
Answer details:
Grade: Senior School
Subject: Business Studies
Chapter: Bonds & Debentures
Keywords: Bond, payable, loan, principal, interest, interest rate, bond, loaning, money, organization, stock, bond, mutual fund, index fund, borrower, issuer, bondholder.
