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Distinguishing Financial Instruments
An individual has two options for their savings. Option 1 is to give a company $1,000 in exchange for a promise of receiving $50 each year for the next 10 years, after which the original $1,000 will be returned. Option 2 is to give a company $1,000 in exchange for a small portion of ownership, which entitles them to a share of the company's profits, whatever they may be, each year. Which of these two options represents the purchase of a bond? Justify your answer by breaking down the characteristics of the chosen option that align with the fundamental nature of this type of financial asset.
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