What Is a Disadvantage of Issuing Bonds Compared to Shares

question 17

Multiple Choice

What is a disadvantage of issuing bonds compared to shares?

• A)The dividends must be paid indefinitely.
• B)Bond interest expense is not tax deductible.
• C)Interest must be paid on a periodic basis regardless of earnings.
• D)Bondholders may require early repayment.

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Definitions:

Investments

Assets purchased with the expectation that their value will grow or generate income.

Quarterly

Taking place four times a year, or every quarter.

Withdrawals

The act of taking money out of an account, fund, or similar financial vehicle.

Invest

To allocate money in the expectation of some benefit in the future, usually through the purchase of assets with the hope that they will increase in value.