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Questions and Answers
What type of bonds are issued as physical certificates without the owner's name, requiring the holder to clip coupons for interest payments?
What type of bonds are issued as physical certificates without the owner's name, requiring the holder to clip coupons for interest payments?
- Registered bonds
- Callable bonds
- Bearer bonds (correct)
- Principal-only registered bonds
What must be done to receive the principal payment at maturity for certain bonds issued without the owner's name?
What must be done to receive the principal payment at maturity for certain bonds issued without the owner's name?
- Submit a request form
- Redeem the bonds at a bank
- Surrender the bond (correct)
- Consolidate with other bonds
Which of the following is not a reason a corporation would attach a warrant to their bond?
Which of the following is not a reason a corporation would attach a warrant to their bond?
- Save money (correct)
- Reduce the interest rate
- Enhance attractiveness to investors
- Allow conversion to stock
What is required of the bondholder to receive interest payments from specific types of bonds?
What is required of the bondholder to receive interest payments from specific types of bonds?
What happens to a bond at maturity for bonds without an owner's name?
What happens to a bond at maturity for bonds without an owner's name?
Flashcards
Bearer Bonds
Bearer Bonds
These bonds have no owner's name on the certificate, relying on possession for ownership. The bondholder clips coupons for interest payments and surrenders the bond at maturity for the principal.
Warrant Attached to a Bond
Warrant Attached to a Bond
When a corporation attaches a warrant to a bond, they are essentially giving holders the option to purchase shares of the company's stock at a predetermined price.
Study Notes
Coupon Bonds
- Coupon bonds are physical certificates.
- No owner's name is on the bond.
- Bondholders must clip coupons for interest payments.
- Bondholders must surrender the bond at maturity for principal payment.
Warrants Attached to Corporate Bonds
- Corporations attach warrants to bonds for reasons other than saving money.
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