Final answer:
A corporation with no earnings is only exempt from paying interest on income or adjustment bonds, which are designed for periods of financial difficulty, unlike other debt instruments that require fixed interest payments regardless of earnings.
Step-by-step explanation:
A corporation has obligations to pay interest on various types of debt instruments, irrespective of its earnings. However, when a corporation has no earnings in a particular year, it is not obligated to pay interest on income or adjustment bonds. These bonds are specifically designed to pay interest only if the corporation has sufficient income. In contrast, with convertible subordinated debentures, collateral trust bonds, and equipment trust certificates, the corporation is required to make interest payments regardless of its current earnings.
Income or adjustment bonds are thus structured to protect the corporation during periods of poor financial performance and allow it to avoid interest payments until it has sufficient income.