Which of the Following Is Not True Regarding Bonds

question 22

Multiple Choice

Which of the following is not true regarding bonds?

• A)​Bonds can be purchased from corporations as well as governments.
• B)​Interest must be paid to bondholders before dividends are paid to stockholders.
• C)​Bondholders face no risk from changing market interest rates on bonds that have a fixed interest rate.
• D)​The capital gains on bonds are generally more limited than the capital gains on stocks.

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Definitions:

Cost of Capital

The minimum return that an enterprise must earn on its investments for the value of the firm to remain unchanged, considered in project evaluations and pricing.

Equivalent Annual Annuity

A financial method used to evaluate projects with different lifespans by converting their values into equal annual payments.

Initial Outlay

The initial investment amount needed to fund a project or investment.

Cost of Capital

The rate of return that a company must earn on its project investments to maintain its market value and attract funds.