Question

. On March 3, 2002, pursuant to a public offering, First All State Trucking Corp. (FAST) issued securities to investors in denominations of $1,000. The interest rate was 7 percent per year payable semiannually, and the maturity date was March 3, 2010. The rights and obligations of the issuer, FAST, and the holders of the securities were set forth in an indenture agreement. Because the securities were not secured by a mortgage or lien on corporate property, Alec believes that they are shares of preferred stock. Is Alec correct? Fully explain the type of security involved, and discuss the extent of the holders’ voting rights.

Answer 1

Answer:

The bond is unsecured, doesn't have right to collateral, is called debenture.

Explanation:

The security in this question has a maturity date with stated interest, While, both preferred stocks and bonds would have a guaranteed payment, stocks are ownership in a company and wouldn´t have maturity date, so it can't be a stock.

Maturity dates are relevant to bonds, loans to a company, because that is the date when the bondholder should receive final payment on the face value of the bond. In this case 1.000.