Debt issued by a corporation to fund expansion, modernize, cover expenses, and finance other activities are called?

• A. Preferred Stock
• B. Corporate Bonds
• C. Common Stock
• D. Mutual Funds

Answer: (B)

Debt financing through corporate bonds is when a corporation raises money by selling a debt security to investors. The company borrows funds and agrees to pay periodic interest (the coupon) and to return the principal at a specified future date (maturity). This allows the company to fund expansion, modernization, cover expenses, or finance other activities without giving up ownership.

This differs from preferred stock and common stock, which are equities representing ownership in the company and may involve dividend expectations rather than guaranteed interest payments. Mutual funds, on the other hand, are investment vehicles that pool money to buy a diversified portfolio of securities, not a single corporation’s debt obligation.