Which of the following are debt certificates that are purchased by an investor?

• A. Common stock
• B. Bonds
• C. Dividends
• D. Preferred stock

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the concept of debt certificates. Debt certificates represent a form of borrowing where the issuer promises to repay the principal amount along with interest to the investor. These are typically issued by corporations or governments.
2. Step 2: Differentiate between equity and debt instruments. Equity instruments, such as common stock and preferred stock, represent ownership in a company, whereas debt instruments, like bonds, represent a loan made by the investor to the issuer.
3. Step 3: Analyze the options provided. Common stock and preferred stock are equity instruments, and dividends are payments made to shareholders, not debt certificates.
4. Step 4: Recognize that bonds are debt certificates. Bonds are purchased by investors as a form of lending money to the issuer, who agrees to pay back the principal along with periodic interest payments.
5. Step 5: Conclude that the correct answer is bonds, as they are the only option listed that qualifies as debt certificates purchased by an investor.