Bonds are another type of investment. When you purchase a bond, you’re basically lending your money to a business or to a government. As compensation for lending them your money, you earn interest on it. That means that you’ll get your money back plus a small percentage of the bond’s original amount. Because most bonds are virtually guaranteed, they’re considered a safe investment. You buy it, and then after a number of years, you trade it in for more money than it cost you originally. But because bonds are low risk, you won’t make a whole lot of money from them. Bonds offer a way to make a little bit more money than just putting your money in a savings account, but they also tie your money up for the duration of the bond. If you take your money out sooner than the maturity date, you’ll be penalized, and you’ll end up losing money.

Which of these best describes a bond?

A
low risk, low reward

B
high risk, high reward

C
a diversified investment

D
a savings account