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In the context of economics, which of the following statements is correct regarding a debt instrument ‘bond’?  I. Bonds can only be used by the sovereign government. II. Floating rate bonds are securities which do not have a fixed coupon rate.  III. Owners of bonds are debt holders. 

In the context of economics, which of the following statements is correct regarding a debt instrument ‘bond’?  I. Bonds can only be used by the sovereign government. II. Floating rate bonds are securities which do not have a fixed coupon rate.  III. Owners of bonds are debt holders.  Correct Answer II and III

The correct answer is II and III.

Key Points

  • Debt instruments are assets that require a fixed payment to the holder, usually with the interest.
  • Examples of debt instruments include bonds and mortgages.
  • Bonds are units of corporate debt issued by companies and securitized as tradeable assets.
  • A bond is referred to as a fixed-income instrument since they traditionally have a fixed interest rate (coupon) to debtholders.
  • Owners of bonds are debt holders.
  • Floating rate bonds are securities that do not have a fixed coupon rate.

 Thus, we can say that in the context of economics, owners of bonds are debt holders and floating rate bonds are securities that do not have a fixed coupon rate.

Additional Information

  • Coupon Rate is the rate of interest the bond issuer will pay on the face value of the bond, expressed as a percentage.
  • Floating-interest bonds incur coupon rates which re subject to market fluctuations and elastic within their tenure.

Related Questions

S1: The distinction between state or sovereign and government is developed by Rousseau with utmost exactness and accuracy.
P: While 'state' denotes the community as a whole, created by social pact and manifesting itself in supreme general will, 'government' denotes merely the individual or groups of individuals that is designated by the community to carry into effect the sovereign will.
Q: Government, to Rousseau, means executive power.
R: The individuals, to whom this power is assigned are the officers or the agents of the sovereign.
S: The government is created not by any contract but by a decree of the sovereign, and its function is in no sense to make but only to administer law.
S6: Collectively, they may be called 'prence' or 'magistracy'.

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