Its buyers become lenders to the company.

Understand the Problem

The question is asking about which financial instrument involves buyers becoming lenders to a company. The context implies a quiz format where the user is to select between stocks and bonds, indicating that the correct answer is bonds.

More Information

When a company issues bonds, the buyers of these bonds effectively lend money to the company. In return, the company promises to repay the amount with interest.

Tips

A common mistake is confusing bonds with stocks. Buying stocks makes you an owner, not a lender.

Sources

• Bonds, Borrowing, and Lending - Econlib - econlib.org