What financial instrument is characterized by a promise to repay the principal and interest to holders?

Bonds are a type of debt security that reflect a loan made by an investor to a borrower, typically corporate or governmental. When an entity issues a bond, it is essentially promising to repay the principal amount at a specified maturity date. In addition to the principal, the issuer also agrees to pay a predetermined amount of interest, often at regular intervals throughout the lifetime of the bond. This makes bonds a reliable financial instrument for investors seeking fixed returns over time, as they receive periodic interest payments and the assurance that their original investment will be returned at maturity.

In contrast, other options like assets refer broadly to resources owned by an individual or a company and do not imply a repayment promise, while owner's equity represents the ownership interest in a business, showing the residual interest in the assets after deducting liabilities. A monopoly, however, describes a market structure rather than a financial instrument and does not involve the concept of repayment in financial terms.