What are war bonds classified as?

War bonds are classified as debt securities because they represent a loan from the bondholder to the issuing government, with the expectation that the government will pay back the principal amount, along with interest, after a specified period. When individuals purchase war bonds, they are essentially lending money to finance military operations or war-related expenditures. This loan is usually accompanied by a promise from the government to repay the value of the bonds at maturity, which is a defining characteristic of debt securities.

In contrast, equity securities represent ownership in a company and do not have a repayment obligation in the same way that debt securities do. Government grants and investment partnerships also serve different financial functions that do not align with the nature of war bonds. This distinction highlights why war bonds are specifically categorized as debt securities.