A Written Promise to Repay a Loan Principal Plus Interest

question 177

Multiple Choice

A written promise to repay a loan principal plus interest at a specific future date is

• A)a promissory note.
• B)a line of credit.
• C)commercial paper.
• D)a product warranty.
• E)a returnable deposit.

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Definitions:

Convertible Bonds

Security that is convertible into shares of common stock, at a fixed price, at the option of the bondholder.

Subordinated Debt

A type of debt that ranks below other debts with regard to claims on assets or earnings in the event of a liquidation.

Junk Bonds

High-yield but high-risk bonds issued by companies or entities with lower credit ratings, indicating a higher risk of default.

Zero Coupon Bonds

Pay no coupons at all, but are offered at a substantial discount below their par value and hence provide capital appreciation rather than interest income. Sometimes referred to as “stripped bonds.”