Which of the following types of institutions does NOT typically borrow from investors by issuing bonds?

• A. Sole proprietorships
• B. Federal governments
• C. Municipal governments
• D. Corporations

Answer: (A)

Verified step by step guidance

1. Understand the nature of bonds: Bonds are a form of debt financing where an institution borrows money from investors and agrees to pay it back with interest over time. Typically, larger entities like governments and corporations issue bonds.
2. Analyze the entities listed: Federal governments, municipal governments, and corporations are all large entities that often require significant funding for operations or projects. They commonly issue bonds to raise this capital.
3. Consider the characteristics of a sole proprietorship: A sole proprietorship is a business owned and operated by one individual. It is typically smaller in scale and does not have the same access to capital markets as larger entities.
4. Evaluate the borrowing methods of sole proprietorships: Sole proprietorships usually rely on personal savings, bank loans, or private investors for funding rather than issuing bonds, as they lack the structure and scale to access bond markets.
5. Conclude which entity does NOT typically issue bonds: Based on the analysis, sole proprietorships do not typically borrow from investors by issuing bonds, unlike the other entities listed.