Chapter 22, Problem 7MCQ

To determine

Bonds

Answer to Problem 7MCQ

From the available options, the correct option is IOUs issued by a borrower.

Explanation of Solution

The bonds can be considered as a form of IOU where borrowers issue bonds to get money from investors and a contract is made to repay the money with interest.

Whereas the bonds do not provide any kind of ownership claim to bond owners, and the selling of bonds is not easy as it consumes a lot of time and fees to resell it. And, the company which borrows would be liable for bonds payable.

Therefore, the correct option is a (IOUs issued by a borrower) and all other options are incorrect.

Economics Concept Introduction

Introduction: Financial system refers to a set of financial institutions that offers the exchange of funds, insurance, and deposits such as banks, insurance companies, etc.

Financial assets refer to the liquid assets that consider value from any ownership claim such as cash, bonds, stocks, etc.