If a Bond for Alexcorp Has a 10% Rate of Return

question 261

Multiple Choice

If a bond for Alexcorp has a 10% rate of return and an otherwise identical bond for Tylercorp has a 15% rate of return, which bond carries greater risk?

• A) The Alexcorp bond is riskier.
• B) The Tylercorp bond is riskier.
• C) The two bonds are equally risky.
• D) It is impossible to calculate the riskiness of the bonds.

---

Definitions:

Revenue Recognition

The accounting rule that identifies the precise circumstances for recognizing or recording revenue.

Contract Period

The duration over which a contract is active, specifying the start and end dates of the agreement.

Franchise Fee Accounting

The process of recognizing and managing the fees paid and received for the right to use a franchisor’s trademark and operational model in accounting books.

Initial Franchise Fee

The fee paid by a franchisee to the franchisor at the beginning of the franchise agreement for the right to use the franchisor's brand, system, and support.