Which statement accurately defines bonds?

Bonds are defined as long-term debt securities issued by corporations, municipalities, or governments to raise capital. By purchasing a bond, an investor essentially lends money to the issuer in exchange for periodic interest payments, known as coupon payments, and the return of the bond's face value at maturity.

This definition highlights the key characteristics of bonds: they typically have fixed interest rates, providing predictability of returns for investors, and are designed for longer investment horizons, usually exceeding one year. The involvement of multiple investors is also crucial, as bonds can be bought and sold in the secondary market, allowing various parties to invest in them, which enhances their liquidity and potential attractiveness as an investment vehicle.

In contrast, short-term loans with variable interest rates characterize different financial instruments, and equity shares or preferred stock represent ownership in a company rather than a debt obligation. As such, the definition provided in the correct option encapsulates the essence of what bonds are and helps in understanding their role in debt financing and investment.