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1.
Which of the following is not a feature of a bond?
- A. Residual claim
- B. Residual claim
- C. Residual claim
- D. Residual claim
Answer: Option A
Explanation:
The feature that is not a feature of a bond is Residual claim.
Explanation: A residual claim refers to the ownership interest in a company after all debts and other obligations have been paid. Bonds are debt instruments, not equity instruments, so they do not represent ownership and therefore do not have a residual claim.
Why other options are incorrect:
Explanation: A residual claim refers to the ownership interest in a company after all debts and other obligations have been paid. Bonds are debt instruments, not equity instruments, so they do not represent ownership and therefore do not have a residual claim.
Why other options are incorrect:
- Indenture agreement: This is a legal contract that outlines the terms and conditions of a bond issue, including the interest rate, maturity date, and protective covenants.
- Protective covenants: These are clauses in the indenture agreement that protect bondholders by limiting the actions a company can take, such as taking on additional debt or paying out excessive dividends.
- Principal: This is the face value of the bond, which is the amount the bondholder will receive at maturity.
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