Multiple Choice
How are investors in zero-coupon bonds compensated for making such an investment?
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11. Long Term Liabilities
Introduction to Bonds and Bond Characteristics
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
Which of the following are main characteristics of a bond?
A
Interest coverage ratio, liquidity ratio, and asset turnover
B
Market capitalization, book value, and earnings per share
C
Dividend yield, par value, and voting rights
D
Face value, coupon rate, maturity date, and issuer
Verified step by step guidance1
Understand that a bond is a fixed-income instrument representing a loan made by an investor to a borrower, typically corporate or governmental.
Identify the main characteristics of a bond: Face value (the principal amount the issuer agrees to repay at maturity), coupon rate (the interest rate paid periodically by the issuer), maturity date (the date when the bond's principal is repaid), and issuer (the entity borrowing the funds).
Compare the given options to the characteristics of a bond. For example, interest coverage ratio, liquidity ratio, and asset turnover are financial metrics, not bond characteristics.
Eliminate options that are unrelated to bonds, such as market capitalization, book value, and earnings per share, which are equity-related metrics.
Select the correct answer: Face value, coupon rate, maturity date, and issuer, as these are the defining features of a bond.
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Introduction to Bonds and Bond Characteristics practice set
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