Final answer:
The correct answer is D) interest; principal. When a firm issues bonds, it must pay regular interest payments to bondholders and repay the principal at the bond's maturity date.
Step-by-step explanation:
Issuing bonds to obtain long-term funds legally compels a firm to make regular interest payments and to repay the principal at the maturity date. Thus, the correct answer is D) interest; principal.
A bond is essentially an "I owe you" issued by an entity that needs to raise capital. The entity promises to pay a bondholder periodic interest payments based on the coupon rate and return the bond's face value on the predetermined maturity date.
For instance, if a company issues bonds totaling $10 million with an 8% annual interest rate, it agrees to pay $800,000 in interest each year and repay the $10 million principal at the end of the bond term.