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

11. Long Term Liabilities

Introduction to Bonds and Bond Characteristics

Financial Accounting

11. Long Term Liabilities

Introduction to Bonds and Bond Characteristics

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Multiple Choice

Which of the following best illustrates the difference between a secured and an unsecured bond?

A secured bond is backed by specific assets as collateral, while an unsecured bond is not backed by collateral.

Secured bonds can only be issued for terms less than five years, while unsecured bonds have no term limit.

An unsecured bond is only issued by government entities, while secured bonds are issued by corporations.

A secured bond always has a higher interest rate than an unsecured bond.

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Verified step by step guidance

Step 1: Understand the concept of a secured bond. A secured bond is a type of bond that is backed by specific assets as collateral. This means that if the issuer defaults on the bond, the bondholders have a claim on the specified assets to recover their investment.

Step 2: Understand the concept of an unsecured bond. An unsecured bond, also known as a debenture, is not backed by any specific collateral. Instead, it is supported only by the issuer's creditworthiness and reputation.

Step 3: Compare the key difference between secured and unsecured bonds. The primary distinction is that secured bonds have collateral backing them, providing additional security to bondholders, while unsecured bonds rely solely on the issuer's ability to repay.

Step 4: Evaluate the statements provided in the problem. Analyze each statement to determine which one accurately describes the difference between secured and unsecured bonds. For example, the statement 'A secured bond is backed by specific assets as collateral, while an unsecured bond is not backed by collateral' aligns with the definitions provided.

Step 5: Eliminate incorrect statements. For instance, the statement 'Secured bonds can only be issued for terms less than five years, while unsecured bonds have no term limit' is not accurate, as bond terms are not inherently tied to whether they are secured or unsecured.