Bonds represent a legal claim against a firm, obligating the firm to pay the bondholders a fixed annual interest payment (the coupon) and to repay the principal (the face value) at maturity. Unlike stocks, bonds do not confer ownership rights or voting rights in the corporation.

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A Bond Is

Question 384

Multiple Choice

A bond is

A) a legal claim to a part of a corporation's future profits that includes voting rights.
B) a legal claim to a part of a corporation's future profits that does not include voting rights.
C) a legal claim against a firm, providing a fixed annual coupon payment and a lump-sum payment at maturity.
D) a nonlegal promise to provide an annual payment to the holder when the corporation makes profits.

Correct Answer: