Corporate bonds are A.assets for the investors.B.issued by the investors.C. held by the borrowers.D.a source of income for the issuing company.
Question
Corporate bonds are
A. assets for the investors.
B. issued by the investors.
C. held by the borrowers.
D. a source of income for the issuing company.
Solution
Corporate bonds are:
A. Assets for the investors: This is true. When an investor purchases a corporate bond, they are essentially lending money to the company in exchange for periodic interest payments and the return of the bond's face value when it matures. Therefore, the bond is an asset to the investor.
B. Issued by the investors: This is false. Corporate bonds are issued by corporations, not investors. The investors are the ones who buy these bonds, not issue them.
C. Held by the borrowers: This is false. The borrowers in this context are the corporations that issue the bonds. They do not hold the bonds; instead, they owe the bond's value to the investor who holds the bond.
D. A source of income for the issuing company: This is true. When a company issues a bond, it receives money from the investor who buys the bond. The company can then use this money to fund its operations, making it a source of income. However, it's important to note that the company will have to pay this money back with interest when the bond matures.
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