Chapter 15, Problem 2Q

(a)

To determine

Bond: Bond is a financial instrument which generates the fixed returns to the investors within a specified period of time. The income generated on the bonds is known as interest amount.

Secured bonds: Secured bonds refer to the bonds which are secured by the assurance of issuer that in any loss, the interest will be paid from the sale of a specific asset which is put aside as a collateral of bond.

Unsecured bonds: Unsecured bonds refer to the bonds which are not secured by the pledge or any specific asset.

Convertible bonds: Convertible bonds are the bonds which can be converted into equity within a pre-specified period.

Callable bonds: Callable bonds are the bonds for which the issuer can make a call to buy back the bonds before its maturity.

To Explain: The difference between secured and unsecured bonds.

(b)

To determine

To Explain: The difference between convertible and callable bonds.