Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Introduction to Investments in Securities

Financial Accounting

7. Receivables and Investments

Introduction to Investments in Securities

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

Which statement best describes how an investor makes money from investing in debt securities?

By exercising stock options to purchase shares at a discount

By earning dividends paid out of company profits

By selling shares at a price higher than the purchase price

By receiving periodic interest payments and the return of principal at maturity

Previous problemNext problem

Verified step by step guidance

Understand the nature of debt securities: Debt securities are financial instruments issued by entities (such as corporations or governments) to raise funds. They typically involve borrowing money from investors with a promise to repay the principal amount at maturity along with periodic interest payments.

Recognize the primary way investors earn money from debt securities: Investors receive periodic interest payments, which are calculated based on the interest rate (coupon rate) specified in the debt security agreement.

Understand the return of principal: At the maturity date of the debt security, the issuer repays the original principal amount to the investor, completing the investment cycle.

Compare debt securities to other investment types: Unlike equity securities (stocks), which generate returns through dividends or capital gains, debt securities focus on fixed interest payments and principal repayment, providing a predictable income stream.

Conclude that the correct answer is: 'By receiving periodic interest payments and the return of principal at maturity,' as this describes the fundamental way investors earn money from debt securities.