Question

Which statement is TRUE about adjustment (income) bonds?
A. Timing of interest payments made is not predictable and any interest payment made is not predictable in amount
B. Timing of interest payments made is not predictable and any interest payment made is predictable in amount
C. Timing of interest payments made is predictable and any interest payment made is predictable in amount
D. Timing of interest payments made is predictable and any interest payment made is not predictable in amount

Answer 1

Answer:

option A is correct answer

Explanation:

Scheduling of interest payments is also not consistent and there is no predictable sum of payments made.

A company issues an adjustment bond whenever it reorganizes its liabilities to cope with financial problems or imminent bankruptcy. Adjustment bonds have such a mechanism where payments only occur when company has profits.

It also gives companies the ability to change terms like interest rates & time to completion, gives the company a better chance to fulfill its obligations without going into bankruptcy.