Multiple Choice QuestionWhat is a bond?Multiple choice question.Part of a firm's profits that the firm may distribute to stockholdersShares of ownership in a companyDebt instruments that larger companies sell to raise long-term fundsSomething an individual buys that makes him or her liable for the company's debt
Question
Multiple Choice QuestionWhat is a bond?Multiple choice question.Part of a firm's profits that the firm may distribute to stockholdersShares of ownership in a companyDebt instruments that larger companies sell to raise long-term fundsSomething an individual buys that makes him or her liable for the company's debt
Solution
The correct answer is: Debt instruments that larger companies sell to raise long-term funds.
Here's why:
A bond is a type of investment that involves lending money to an organization (typically a corporation or government) for a defined period of time at a variable or fixed interest rate. Companies issue bonds to raise funds for various reasons such as starting new projects, purchasing equipment, or expanding operations.
The other options are incorrect because:
- Part of a firm's profits that the firm may distribute to stockholders: This is a dividend, not a bond.
- Shares of ownership in a company: This refers to stocks, not bonds.
- Something an individual buys that makes him or her liable for the company's debt: This is not accurate. When you buy a bond, you are lending money to the company, not taking on its debt. If the company goes bankrupt, bondholders are paid before stockholders, but they do not become liable for the company's debt.
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