Financial Industry Regulatory Authority (FINRA) Practice Exam 2025 - Free FINRA Practice Questions and Study Guide

The correct choice is Income bonds. Income bonds are designed to pay interest only when the issuing company has sufficient earnings. This means that if the issuer does not generate enough income during a particular period, the interest payments might not occur at all. As a result, investors in income bonds should understand that the predictability of interest payments differs significantly from traditional fixed-rate bonds, which offer scheduled income regardless of a company's financial performance.

In contrast, debentures, convertible bonds, and subordinated debentures usually provide fixed interest payments at regular intervals. Debentures, being unsecured debt, still pay interest based on a specified schedule. Convertible bonds allow investors to convert their bonds into shares of the issuing company, but they also typically provide regular interest payments. Subordinated debentures, while lower in priority for repayment in the event of liquidation, still function as traditional bonds with fixed interest payment schedules. Thus, investors can generally expect a more stable income stream from these types of bonds compared to income bonds.