Question

Sin Qua Corporation is a company listed on the stock exchange and issues corporate bonds. Which statement is most likely true?

A.
Investors can buy the bonds directly from the government.
B.
Investors will have to pay tax on the interest income received from the bonds.
C.
The bond pays a quarterly dividend at a specified percentage of the investment.
D.
The bond’s price is linked to the company stock price.
E.
The bond’s maturity date is determined by the company’s creditworthiness.

Answer 1

B. Investors will have to pay tax on the interest income received from the bonds.

Step-by-step explanation:

Interest earned from corporate bonds and capital gained through corporate bond transactions is taxable income. The interest earned from a corporate bond is subject to taxation by both the federal and state governments.

The government will not sell sin Qua corporation bonds as it is a public company. Bonds do not pay interest quarterly but rather semi-annually or annually. Again, the maturity of the bond is determined at the time they are issued. Creditworthiness will only affect the bond price but not its maturity period.

Investors will have to pay tax on the interest income received from the bonds is thus the correct statement.