Which of the following statements is true?
A) A person who buys a bond always pays the face value for the bond.
B) If a corporation issues a bond and Dennis buys it,Dennis becomes one of the owners of the corporation.
C) A stockholder of Firm X is one of the owners of Firm X.
D) The owner of the bond receives periodic payments equal to its coupon rate times the price he paid for the bond.

Question

Quizplus · Accepted Answer

A stockholder of a firm owns a portion of the company and has a claim on its assets and earnings. A bondholder is a creditor of the company and receives periodic interest payments and the return of the principal when the bond matures. Option A is false because the market price of a bond may be different from its face value. Option B is false because buying a bond does not make the buyer an owner of the corporation. Option D is partially true but incomplete because it does not mention that the periodic payments are called coupon payments.

Which of the Following Statements Is True