Financial Industry Regulatory Authority (FINRA) Practice Exam 2025 - Free FINRA Practice Questions and Study Guide

Question: 1 / 400

For which of the following securities might an investor expect less consistent interest payments due to reliance on company profits?

Debentures

Convertible bonds

Income bonds

An investor might expect less consistent interest payments from income bonds because these securities are specifically designed to pay interest only when the issuing company earns sufficient profits. Unlike fixed-rate securities, income bonds do not guarantee regular interest payments. Instead, their interest payments are contingent upon the company's financial performance. If the company does not generate enough earnings, interest payments may be skipped altogether without placing the issuer in default.

This characteristic makes income bonds more risky for investors who depend on stable income streams, as payment is less assured compared to other types of securities, which typically provide more consistent and reliable interest payments regardless of the company's earnings.

Get further explanation with Examzify DeepDiveBeta

Subordinated debentures

Next Question

Report this question

Download Financial Industry Regulatory Authority (FINRA) Practice Exam PDF Study Guide
Subscribe

Get the latest from Examzify

You can unsubscribe at any time. Read our privacy policy