A Bond That Is Backed Only by the Reputation of the Issuing

question 25

Multiple Choice

A bond that is backed only by the reputation of the issuing corporation is called a(n) ________ bond.

• A)debenture
• B)mortgage
• C)indenture
• D)preemptive
• E)treasury

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Definitions:

Payback Period

A rephrased definition: The duration needed to recover the initial expenditure on an investment through the cash flows it generates.

AAR

Average annual return, indicating the mean yearly profit or loss generated by an investment over a specified period.

Firm Value

The total value of a company, considering all sources of capital including debt and equity.

Required Return

The minimum expected return on an investment needed by an investor, factoring in the risk associated with the investment.