How are bonds generally considered in terms of risk compared to stocks?

Bonds are generally considered lower risk investments than stocks for several reasons, primarily due to their structure and the way they are treated in the capital markets. When investors purchase bonds, they are essentially lending money to an issuer (which can be a corporation, government, or municipality) in exchange for periodic interest payments and the return of principal upon maturity. This structured repayment agreement typically results in a more stable income stream compared to the potential volatility and price fluctuations commonly associated with stocks.

Additionally, in the event of a company's liquidation, bondholders are prioritized over shareholders when assets are distributed. This preference in the capital structure adds a layer of security for bondholders; they are more likely to recover their investment compared to stockholders, who may lose their entire investment if the company fails.

While all investments carry some level of risk, including bonds, they are seen as safer, particularly U.S. Treasury bonds, which are considered risk-free in terms of default risk due to the government's backing.

The other options present misconceptions about the risk profile of bonds compared to stocks. For instance, while bonds can carry some risks such as interest rate risk and credit risk, they are not universally higher risk than stocks. Additionally, suggesting that bonds carry no risk if held to maturity