Which of the following statements is true regarding a bond? a.A bond is a certificate that...

Which of the following statements is true regarding a bond?

a.A bond is a certificate that acts as evidence of ownership in a corporation. b.Bondholders receive dividends semiannually. c.A bond is a certificate that represents a corporation's promise to repay a certain amount of money and interest in the future. d.If you buy a bond from a company, you are borrowing money from the company.

Expert Solution

The correct answer for the question is Option C - A bond is a certificate that represents a corporation's promise to repay a certain amount of money and interest in the future. Bonds are credit instruments issued by a company in order to raise funds for its usage. A bond is a promise that interest payments would be made regularly to bond holders along with paying the face value of the bond at maturity. Hence, this is the correct answer.

Option A is incorrect. Bondholders do not enjoy ownership privileges in a corporation and hence this option is incorrect.

Option B is incorrect. Bondholders do not receive dividends. They just receive interest payments periodically(may be quarterly, half yearly, annually etc) as per the terms and conditions of the bond agreement.

Option D is incorrect. If you a buy a bond from the company, the company is borrowing money from you and it is not vice versa. Hence, the option is incorrect.

Please let me know if you have any questions via comments and all the best :)

ekkarill92 answered 2 years ago

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