QQuestionAnatomy and Physiology
QuestionAnatomy and Physiology
A bondholder that owns a $\$ 1,000,10 \%, 1$-year bond has:
Multiple Choice
Ownership rights in the issuing company.
The right to receive $\$ 1$ semiannually until maturity.
The right to receive $\$ 1,1$ at maturity.
The right to receive $\$ 10,1$ at maturity.
The right to receive dividends of $\$ 1,1$ per year.
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Answer
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Step 1: Identify the bondholder's rights
The bondholder has several rights as a result of owning a $\$ 1,000, 10\%, 10$-year bond.
Step 2: Explanation of the rights
- The right to receive dividends of $\$ 1,000$ per year: This is incorrect.
- Ownership rights in the issuing company: While bondholders do have some level of ownership in the company, it is significantly less than that of shareholders. This ownership is represented by the bond itself, which is a form of IOU from the company to the bondholder. Dividends are paid to shareholders, not bondholders. Bondholders receive coupon payments as interest on their investment.
Final Answer
- Ownership rights in the issuing company. - The right to receive $\$ 1$ semiannually until maturity. - The right to receive $\$ 1,1$ at maturity. - The right to receive dividends of $\$ 1,1$ per year is incorrect. - The right to receive $\$ 10,1$ at maturity is incorrect.
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