A _____ is a financial contract in which the borrower and the lender agree to certain conditions about repayment, operating policies, other borrowing activities while they are outstanding, and other provisions.
A)preferred stock
B)common stock
C)paid-in-capital
D)bond
E)a restriction on retained earnings

Question

Quizplus · Accepted Answer

A bond is a financial contract that outlines the terms of a loan agreement between a borrower (issuer) and a lender (bondholder). The terms of a bond include repayment details, interest rates, and other provisions such as operating policies, restrictions on other borrowings, and actions that can trigger default. Preferred stock (A) and common stock (B) are different types of securities that represent ownership in a company but do not involve a loan agreement. Paid-in-capital (C) is the amount of capital that a company receives from investors in exchange for shares of stock, and a restriction on retained earnings (E) is a provision that limits a company's ability to use its retained earnings for certain purposes.

A _____ Is a Financial Contract in Which the Borrower