A ________ is a formal pledge (an IOU)obligating the issuer to pay interest periodically and repay the principal at maturity (a preset future date)to the lender.
A) commercial bank loan
B) corporate bond
C) mutual fund
D) bond indenture

Question

Quizplus · Accepted Answer

A corporate bond is a formal pledge obligating the issuer (usually a corporation) to pay interest periodically and repay the principal at maturity to the lender. The terms of the bond, including the interest rate and repayment date, are specified in the bond indenture. Commercial bank loans are not necessarily formal pledges to repay with interest, and mutual funds are not a type of debt instrument. The bond indenture is not the debt instrument itself, but rather the legal document specifying the terms of the bond.

A ________ Is a Formal Pledge (An IOU)obligating the Issuer