The legal contract between the bond issuer and the bondholders is called a(n):Multiple ChoiceBond indenture.Term bond.Installment note.Debenture.Mortgage.
Question
The legal contract between the bond issuer and the bondholders is called a(n):
- Multiple Choice
- Bond indenture.
- Term bond.
- Installment note.
- Debenture.
- Mortgage.
Solution
The legal contract between the bond issuer and the bondholders is referred to as a bond indenture.
A bond indenture is a formal agreement that outlines the rights and responsibilities of both the issuer (typically a corporation or government) and the bondholders. It specifies essential details such as the interest rate, maturity date, and the terms under which the issuer will pay back the bondholder. The indenture serves to protect the interests of the bondholders, ensuring that they receive their payments as stipulated in the contract. Other options provided, such as term bond, installment note, debenture, and mortgage, refer to other financial instruments or agreements but do not specifically denote the legal contract governing bonds. Thus, the correct choice is Bond indenture.
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