Which of the Following Is True About Bonds and Common

question 143

Multiple Choice

Which of the following is true about bonds and common stock?

• A)Bonds and common stock are both shareholders' equity accounts.
• B)The company that has issued bonds and common stock has a legal responsibility to pay back the principal when the bonds and stock mature.
• C)The company has a legal responsibility to pay interest and dividends each year.
• D)Bondholders do not have voting rights,while common shareholders do.

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Definitions:

Natural Monopoly

A type of monopoly that exists due to the high cost or complexity of operating in a specific industry, which effectively prevents other competitors.

Monopoly Inefficiency

The loss of economic efficiency that occurs when a single firm controls the market, leading to higher prices and lower product quantity or quality than in competitive markets.

Perfect Price Discrimination

A market strategy where a seller charges each buyer their maximum willingness to pay, capturing the entire consumer surplus as profit.

Willingness-to-Pay

The maximum amount a consumer is prepared to spend on a good or service.