Seattle Music, Inc

question 229

Multiple Choice

Seattle Music, Inc., recently offered bonds for sale to the public. The unsecured corporate bond paid interest of 9% to investors for the twenty-year life of the bonds. Seattle Music is obligated to:

• A) Represent each bondholder as an owner in the company.
• B) Pay interest semi-annually.
• C) Pay stockholders their dividends, before paying bondholders their interest.
• D) Pay each owner their principal if and when they want to cash in their investment.

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Definitions:

Sufficient Consideration

A necessary element in contract law where something of value is exchanged between parties to form a valid contract.

Illusory Promises

Statements or promises that appear to assure performance or commitment but, due to vague or conditional terms, do not actually bind the promisor to any action.

Forbearance

A temporary postponement of mortgage payments granted by a lender or creditor in lieu of forcing the property into foreclosure, allowing the borrower time to catch up on payments.

Breach of Contract

A violation of the terms or conditions as stated in a contract, which may result in legal action or penalties against the party at fault.