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In the automobile company example, what did the bond offer investors?
AA share of all the company's future profits
BRepayment in ten years plus twice-yearly interest
CVoting rights at shareholder meetings
DA guaranteed steadily rising market price
Answer & Solution
Correct answer: B. Repayment in ten years plus twice-yearly interest
1. The example company offered both stocks and bonds.
2. With the bonds, it agreed to pay back the initial investment in ten years plus interest twice a year at 8% annually.
3. Profit shares and voting rights belong to stockholders, not bondholders.
4. No security guarantees a rising price, the last option's trap.
_Source: "Saving and Investing: A Roadmap to Your Financial Security" (US SEC, public domain), section Investing_
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