Jason's Paints just issued 20-year, 7.25 percent, unsecured bonds at par. These bonds fit the definition of which one of the following terms?

Question

Quizplus · Accepted Answer

The best choice is E, debenture, because it refers to an unsecured bond. A debenture is similar to a bond, but it is not secured by collateral or specific assets. Option A, note, is a general term that refers to any type of debt security, not specifically bonds. Option B, discounted, refers to bonds sold below par value, which is not the case here as the bonds were sold at par. Option C, zero-coupon, refers to bonds that do not pay periodic interest but instead are sold at a discount and have the full face value paid at maturity, which is not the case here as the bonds pay periodic interest. Option D, callable, refers to bonds that may be redeemed by the issuer before maturity, which is not mentioned in the question stem.

Jason's Paints Just Issued 20-Year, 7