What is true about bonds?

Bonds are a type of debt instrument that companies, municipalities, and governments issue to raise capital. When investors buy bonds, they are essentially lending money to the issuer in exchange for periodic interest payments and the return of the bond’s face value at maturity.

The correct statement is that bonds have a predetermined maturity date and interest rate. This means that at the time of issuance, the terms of the bond, including when it will mature (the date when the principal amount is repaid) and the interest rate (the return paid to bondholders), are established. This characteristic makes bonds a predictable investment, as investors know exactly how long they will hold the bond and the income they can expect from it.

The other statements do not accurately reflect the nature of bonds. Bonds do not represent ownership in a company; that characteristic pertains to stocks. While bonds can be issued by various entities, including corporations and municipalities, they are not limited to just the federal government. Lastly, bonds do not guarantee profits in all market conditions; they can still involve risks, such as interest rate risk and credit risk.