What is the defining feature of a fixed-income security like a bond?

A fixed-income security, such as a bond, is primarily defined as representing a loan made by an investor to a borrower. When an individual purchases a bond, they are effectively lending money to the issuer, which is typically a government or corporation. In return for this loan, the issuer agrees to pay back the principal amount on a specified maturity date, along with periodic interest payments (coupon payments) at a set rate. This structure creates predictability in the cash flows for the investor, which is a hallmark of fixed-income securities.

This characteristic fundamentally differentiates bonds from equity securities, which represent ownership in a company, as indicated in another answer choice. While the returns on bonds can vary based on interest rates and other market factors, the fixed nature of the loan and the specified interest payments provide a level of stability that is inherent to fixed-income securities. Therefore, the defining feature highlighted in this context is the nature of the relationship between the lender (investor) and the borrower (issuer) encapsulated in the agreement of the bond.