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

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Multiple Choice

An investor purchased a 10-year level bond. Which of the following best describes a 'level' bond in the context of investments in securities?

A bond whose interest payments increase each year over the 10-year period.

A bond that has a variable interest rate adjusted annually.

A bond that pays all interest and principal at maturity after 10 years.

A bond that pays the same amount of interest each year throughout its 10-year term.

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Verified step by step guidance

Step 1: Understand the concept of a 'level bond'. A level bond is a type of fixed-income security where the interest payments (coupon payments) remain constant throughout the life of the bond. This means the investor receives the same amount of interest each year until the bond matures.

Step 2: Compare the options provided in the problem. Analyze each description to determine which one aligns with the definition of a level bond.

Step 3: Eliminate incorrect options. For example, a bond whose interest payments increase each year or a bond with a variable interest rate does not fit the definition of a level bond, as these involve changing interest payments.

Step 4: Focus on the correct option. A bond that pays the same amount of interest each year throughout its 10-year term matches the definition of a level bond, as it provides consistent and predictable interest payments.

Step 5: Conclude that the correct answer is the option describing a bond that pays the same amount of interest each year throughout its 10-year term, as this is the defining characteristic of a level bond.