Financial Industry Regulatory Authority (FINRA) Practice Exam 2026 - Free FINRA Practice Questions and Study Guide

The correct answer indicates that both corporate debentures and income bonds must pay principal as it comes due. This characteristic is crucial because it aligns with the fundamental obligations of these debt instruments.

Corporate debentures are unsecured bonds that represent a promise by the issuing corporation to pay back the principal amount at maturity, along with interest payments, if applicable. Income bonds, while they may have provisions that rely on the issuer’s income for interest payments, still carry the obligation to repay the principal amount at maturity.

It’s important to note that although income bonds typically do not guarantee interest payments if the issuer does not have sufficient earnings, both types of bonds maintain the same principal repayment requirement. This obligation to pay back the principal is a standout feature of all debt securities while differentiating them from equity securities.

Other choices may present inaccurate associations, as many corporate debentures are not secured by assets and instead take on a higher risk due to their unsecured nature. Additionally, not all debentures or income bonds might conform to interest payment structures, which makes the assertion regarding interest payments misleading. However, the commitment to repay the principal exemplifies a fundamental tenet in the structure of these bonds.