Chapter 10, Problem 1Q

What are the primary characteristics of a bond? For what purposes are bonds usually issued?

To determine

Explain the primary characteristics of a bond.

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from investors to raise fund for financing the operations.

The primary characteristics of a bond are as follows:

• It is one of the important debt instrument used for raising capital of the corporations or governmental agencies.
• It is traded on recognized stock exchanges.

To determine

Explain the purpose of issuing bonds.

Explanation of Solution

Bonds: Bonds are long-term promissory notes that are represented by a company while borrowing money from investors to raise fund for financing the operations.

The bonds are usually issued for the purpose of raising funds in the corporation for financing the operations.