Lulu purchased a security that promises to pay $50 twice a year from January 15, 2009 to January 15, 2013 and then pay $1,000 on January 15, 2013.The security is a debt to the company that issued it.The security is a
A) depreciating asset.
B) bond.
C) share of stock.
D) physical capital.
E) net investment to the company that issued it.

Question

Quizplus · Accepted Answer

The security that Lulu purchased is paying regular interest payments twice a year and has a fixed principal payment at the end. This is the definition of a bond, which is a debt instrument issued by a company or government to raise funds. Therefore, the correct answer is B - bond.

Lulu Purchased a Security That Promises to Pay $50 Twice