Certified Internal Auditor (CIA) Part 3: Business Knowledge for Internal Auditing — Question 248

Which of the following is true regarding bonds?

Answer options

• A. Bondholders do not have voting rights but obtain corporate control via interest pay-outs.
• B. Debenture bonds are rarely used by organizations with good credit ratings.
• C. Using bonds involves paying interest on a periodic basis and repaying the principal at the due date.
• D. Debenture bonds have specific assets pledged by the organization as collateral for the bonds.

Correct answer: C

Explanation

The correct answer, C, accurately describes the bond process, which includes periodic interest payments and principal repayment at maturity. Option A is incorrect because bondholders do not gain control through interest pay-outs. Option B is misleading as debenture bonds can still be used by organizations with good credit ratings. Option D is false because debenture bonds are typically unsecured and do not have specific assets pledged as collateral.