Question

Why might a town decide to issue bonds?

Answer 1

The answer is C) Both A and B

When a town issues bonds, it is issuing an IOU with interest, usually to help fund projects (such as roads or bridges) or to provide a public service. 

Keep in mind that the town is saving money for residents only if it is the residents of the town who purchase the bonds. These bonds enable the residents to earn a return on their savings, since they are entitled to be paid back by the town with interest at a predetermined date. 

Answer 2

The correct option is (C). Both A and B.

Further Explanation:

Bond:

The bond is a long-term debt which the company promises to pay with interest to their bondholders.

Justification for the correct and incorrect answer:

A-

To help save money for residents: This option is incorrect.  

By issuing bonds, the residents of the town can save their money.  

B-

To build new roads or bridges: This option is incorrect.

By issuing bonds, this will help in building new roads or bridges. Bonds will help the town to invest in building.

C-

Both A and B: This option is correct.

The bonds will make the town residents to earn interest by issuing the bonds and help them to save money for them, and also help to build new roads or bridges. Therefore, this option is correct.

D-

Neither A nor B: This option is incorrect.

The bonds will make the town to earn interest by issuing the bonds and help them to save money for them, and also help to build new roads or bridges. Therefore, the option (C) is correct.

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Answer Details:

Grade: High school

Chapter: Stocks and bonds

Subject: Business studies

Keywords: Why might a town decide to issue bonds, to help save money for residents, to build new roads or bridges, both A and B, neither A nor B.