Why Do Investors Purchase Corporate Bonds

question 78

Multiple Choice

Why do investors purchase corporate bonds?

• A) Interest income
• B) Repayment at maturity
• C) Possible increase in value
• D) All of the above.
• E) None of the above.

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Definitions:

Effective Interest Method

A method of calculating the amortized cost of a financial asset or liability and allocating the interest income or expense over the relevant period.

Interest Rate

The percentage charged on a loan or paid on deposits over a specific period, usually expressed as an annual percentage of the principal.

Amortization Assumption

The accounting practice of gradually writing off the initial cost of an intangible asset over its useful life.

Interest Expense

The cost incurred by an entity for borrowed funds; interest payments made on any form of debt over a given period.