Suppose Van would like to invest $2,000 of his savings. One way of investing is to purchase stock or bonds from a private company. Suppose RoboTroid, a robotics firm, is selling bonds to raise money for a new lab—a practice known as (Debt or equity) finance. Buying a bond issued by RoboTroid would give Van (An IOU, a promise pay, from or a claim to partial ownership) the firm. In the event that RoboTroid runs into financial difficulty, (Van and other bondholders or the stockholders) will be paid first. Assuming that everything else is equal, a U. S. government bond that matures 10 years from now most likely pays a (higher or lower) interest rate than a U. S. government bond that matures 30 years from now.

Debt ; An IOU ; Van and other bondholder ; lower

Explanation: When a company or organization decides to raise funds or capital through the sale of bonds such as in the case of RoboTroid, this is called DEBT financing. The money used to purchase these bonds could be interpreted as loans collected by the organization from the bondholders, thus giving Van, who is now a bondholder an 'I Owe You' or promise to repay from the firm which are usually paid with a fixed rate of interest.

In any event where RoboTroid runs into financial problem or meltdown, Van and other bondholders are paid ahead of shareholder's who claim partial ownership of RoboTroid. Assuming that everything else is equal, U.S government bonds that mature in 10 years pays lower interest rate than that which matured in 30years.