Asked by lizzy rybarczyk on Jul 05, 2024
Verified
Which one of the following statements is correct concerning bond classifications?
A) A debenture is a long-term bond secured by the fixed assets of a firm.
B) A mortgage security is a bond issued solely by a home builder.
C) A note is a bond which has an original maturity date longer than 10 years.
D) A subordinated bond receives preferential treatment over all other bonds in a bankruptcy.
E) A callable bond can be repurchased by the issuer prior to the initial maturity date.
Callable Bond
A callable bond is a type of bond that gives the issuer the right to pay off the bond before its scheduled maturity date at a predefined call price.
Debenture
A type of debt instrument that is not secured by physical assets or collateral.
Subordinated Bond
A type of bond that has a lower priority than other bonds of the issuer in case of liquidation during bankruptcy.
- Gain insight into the essential features and classifications of bonds.
- Explore the specific characteristics of bonds like callable, convertible, and zero-coupon bonds.
Verified Answer
ZK
Zybrea KnightJul 07, 2024
Final Answer :
E
Explanation :
Callable bonds give the issuer the right to repurchase the bond before its maturity date, allowing the issuer to refinance the debt if interest rates decline.
Learning Objectives
- Gain insight into the essential features and classifications of bonds.
- Explore the specific characteristics of bonds like callable, convertible, and zero-coupon bonds.