Which of the following is a primary reason why the bond market is considered larger than the stock market?

• A. Stocks are rarely traded compared to bonds.
• B. Bonds are always riskier than stocks, attracting more investors.
• C. The bond market only includes government securities, making it more exclusive.
• D. Governments and corporations frequently issue bonds to raise large amounts of capital.

Answer: (D)

Verified step by step guidance

1. Understand the context of the bond market: Bonds are debt instruments issued by governments and corporations to raise capital, while stocks represent ownership in a company.
2. Recognize the frequency of bond issuance: Governments and corporations often issue bonds to finance projects, operations, or manage debt, which contributes to the bond market's size.
3. Compare the trading activity: While stocks are actively traded, bonds are issued in larger quantities and often held by investors for longer periods, contributing to the perception of a larger market.
4. Consider the diversity of the bond market: The bond market includes various types of bonds, such as government securities, corporate bonds, municipal bonds, and more, which adds to its size and complexity.
5. Conclude that the primary reason the bond market is larger is due to the frequent issuance of bonds by governments and corporations to raise substantial amounts of capital.