Maplewood Toy Company hopes to raise long-term capital by promising in writing to repay the principal provided by potential creditors in ten years. Additionally, the certificate issued by Maplewood promises to pay 5% interest annually for the ten-year life of the security. Maplewood intends to issue:

Question

Quizplus · Accepted Answer

Maplewood is promising to repay the principal and pay annual interest, making this a bond. Stocks represent ownership in the company, mutual funds are collections of securities, and commodities are physical goods such as gold or oil.

Maplewood Toy Company Hopes to Raise Long-Term Capital by Promising