A Bond That Only Pays Interest If the Firm Has

question 80

Multiple Choice

A bond that only pays interest if the firm has sufficient earnings to cover the interest payments is called what?

• A)Callable bond.
• B)Putable bond.
• C)Convertible bond.
• D)Income bond.
• E)Indexed bond.

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Definitions:

Moral Hazard

A situation where one party in an agreement can take risks because the other party bears the consequences of those risks.

Theft

The act of stealing, or unlawfully taking someone else's property without their permission with the intent to permanently deprive them of it.

Lock

A mechanism for controlling access, ensuring security by preventing or limiting access to a location or object.

Moral Hazard

A situation where one party in a contract can take risks because they know they will not have to bear the full consequences of their actions.