Money Smarts Quiz Answer (2a)

a. you own a part of the company.

The correct answer is: b. you have lent money to the company.

When you buy a bond, you are lending money to the company. The company promises to pay you interest and to return your money on a date in the future. This promise generally makes bonds safer than stocks, but bonds can be risky. To assess how risky a bond is you can check the bond's credit rating. Unlike stockholders, bond holders know how much money they will make, unless the company goes out of business. If the company goes out of business, bondholders may lose money, but if there is any money left in the company, they will get it before stockholders.

Go to the next question ...

Question 2, Answer a