QAEconomics › When you buy a ____, you are loaning money to an organization
Q

When you buy a ____, you are loaning money to an organization

a) Stock

b) Bond

c) Mutual fund

d) Index fund

A

Buying a bond is a way of loaning money to an organization, which in most cases is a government. Therefore, the correct answer is B. The entity that received the money then pays back with interest. Since bonds are temporary, the organizations getting them to utilize the funds to finance operations relating to private entities, local governments and municipalities.

Stocks involves investing in a specific company and earning a portion of the company shares. However, this is a riskier investment than bonds but if they work well, they provide a better interest rate. With funds, several investors put money together and purchase different investments such as bonds or stocks with the intention of sharing the profits later.

2 months ago
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