Which of the following is a key feature of a fixed-income investment?

A key feature of a fixed-income investment is that it usually represents a loan to a borrower. In fixed-income investments, investors lend money to entities such as corporations, municipalities, or governments in exchange for periodic interest payments and the return of the principal at maturity. This structure provides a predictable income stream, which differentiates fixed-income from equity investments that denote ownership in a company.

Fixed-income securities, such as bonds, are characterized by their interest payments, known as coupon payments, which are made at regular intervals. The borrower agrees to pay back the borrowed amount, also known as the face or par value, at the maturity date. This relationship creates a dependable cash flow for investors, making it a popular choice for those seeking lower risk compared to equities.

In contrast, the other options do not accurately represent fixed-income investments. Ownership in a company relates to equity investments, which are fundamentally different. Claiming that fixed-income investments guarantee returns without risk overlooks the realities of credit risk, interest rate risk, and inflation risk that can affect fixed-income securities. Lastly, stating that fixed-income relies on market speculation mischaracterizes it, as fixed-income investments are typically more stable and less subject to speculative volatility compared to equity markets.