Question

A major corporation wants to issue a bond; they have a reputation for being a trustworthy company. They want to use their credit rating to guarantee the bond. What type of bond
would they issue? Why?

A. Corporate
B. Municipal
C. Agency
D. US Treasury

Explain why

Answer 1

Answer:

A. Corporate

Explanation:

Corporate bonds are debt securities(loans) issued by public and private corporations. They present an investment opportunity to the investor(the purchaser of the bond). Corporations with a good reputation with a solid financial background use bonds to raise additional capital for business use.

The corporation assures the investor of a regular interest payment of the amount borrowed. At maturity, the investor gets back the principal amount.  Bonds issued by private and public companies are referred to as corporate bonds, just as the name suggests.