There Are Consequences Associated with Not Paying Interest to Bondholders

question 66

Multiple Choice

There are consequences associated with not paying interest to bondholders. Which of the following apply? I. Not paying an interest payment automatically puts the company in default making the entire loan due.
II) Interest on debt is not required to be paid, but the corporation generally pays it for public relations reasons.

• A) I only
• B) II only
• C) Both I and II
• D) Neither I nor II

---

Definitions:

Franchising Relationship

A business model that involves a contractual partnership between a franchisor and franchisee to use the franchisor's brand and operating methods.

Franchisor

A business entity that grants the right to an individual or group to carry out commercial activities using its branding, system, and intellectual property in exchange for a fee and adherence to agreed specifications.

Corporate Brand

The collective identity, values, and personality of a company as perceived by the public, employees, and stakeholders.

Franchises

Licensing arrangements whereby an individual or company can use a firm's business model and brand for a prescribed period.