Issuing bonds to obtain long-term funds legally compels a firm to pay regular ________ payments and repay the ________ at the maturity date.

Question

Quizplus · Accepted Answer

When a firm issues bonds, it is legally required to make regular interest payments to bondholders and repay the principal (or face value) of the bonds at the maturity date. Therefore, the best choice is D - interest payments and principal repayment. Choices A and C are incorrect because they mention "dividend" payments, which are not applicable to bonds. Choice B is incorrect because bond premium refers to a situation where the market price of the bond is higher than its face value, and it is not a mandatory payment that a firm has to make.

Issuing Bonds to Obtain Long-Term Funds Legally Compels a Firm