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

Who derives the most benefit from a put provision attached to a bond offering?

The government, because it can regulate the bond market more effectively.

The underwriter, because it guarantees a higher commission on the bond sale.

The bond issuer, because it allows them to repurchase the bond at a lower price if interest rates fall.

The bondholder, because it allows them to sell the bond back to the issuer before maturity at a predetermined price.

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Verified step by step guidance

Understand the concept of a put provision: A put provision is a feature attached to a bond that allows the bondholder to sell the bond back to the issuer at a predetermined price before its maturity date.

Analyze the benefits of the put provision: The bondholder benefits because they have the flexibility to exit the investment early, especially if market conditions change unfavorably, such as rising interest rates or declining bond prices.

Evaluate the other options provided in the question: The government does not directly benefit from the put provision as it is not involved in regulating this specific feature. The underwriter does not gain higher commissions due to the put provision, and the bond issuer does not benefit because they may have to repurchase the bond at a higher price than market value.

Identify the correct beneficiary: The bondholder derives the most benefit from the put provision because it provides them with protection against adverse market conditions and ensures liquidity.

Conclude the reasoning: The correct answer is that the bondholder benefits the most from the put provision, as it allows them to sell the bond back to the issuer before maturity at a predetermined price, offering flexibility and risk mitigation.