(D) Both statements are true.
Statement 1 is true — debt instruments represent contracts for lending/borrowing money in exchange for interest. Statement 2 is true — equity returns (~16% avg.) outperform debt, so debt offers lower returns.
The passage states equity returns have averaged ~16% annually, described as "most rewarding compared to other investment options." Debt instruments involve fixed interest payments, confirming lower but stable returns. Both statements align with the source material.