01 Multiple choice — 12 questions
One attempt per option. A correct answer locks the question and explains itself; a wrong one only disables that option, so you can keep trying. The running score sits at the bottom of the page.
02 Written questions — 5 questions
Answer each in full before opening its model answer. The model answers are written at the length a full-mark response needs.
1. Compare bonds and shares across the four differences the lecture gives.
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1. What it is: a bond is a debt on the company; a share is a portion of the capital.
2. Return: a bond earns a fixed profit whether the company is in profit or loss; a share earns nothing if the company makes no profit.
3. Rights: a bondholder has no general assembly, no vote and no control; a shareholder can attend, vote, control and enjoy other privileges.
4. At dissolution: bonds are repaid first; shares get nothing until bonds and debts are paid.
“Debt, Fixed, Silent, First” — flip each word and you describe a shareholder.
2. State the ruling on bonds with its evidence, then give the legitimate alternatives for companies and for governments.
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Bonds are prohibited because they are based on riba, which the Quran and the Sunnah forbid. Jabir reported in Sahih Muslim that the Messenger of Allah ﷺ cursed the one who accepts riba, the one who gives it, the one who records it and its two witnesses, and said, “They are all the same.”
A company in deficit should raise capital through equity — issuing new shares — or by forming joint ventures and partnerships.
A government in deficit may use good loans from individuals without riba; advance zakat collection, as the Prophet ﷺ took the zakat of Al-Abbas two years in advance; encourage voluntary donations; and impose exceptional taxes (“Loan, Zakat, Give, Tax”).
3. Name the three kinds of instrument bonds go by — investment certificates, treasury bills and loan bonds — and describe each.
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Investment certificates come in three types: (a) increasing nature — money stays with the bank for up to ten years, accumulating an increase on principal and interest; (b) current yield — a specified annual interest; (c) increasing value with lottery draws — increasing interest plus prize draws, sold as an “encouragement to save”. All three pay interest on a loan.
Treasury bills are issued by the government for a short term, usually three months, sold by tenders. They have very high liquidity but scant revenue, and are the best-seller for commercial banks.
Loan bonds are negotiable, indivisible certificates of equal face value issued to subscribers for amounts lent to the company as a long-term loan through public subscription, repaid with interest over a specified period.
4. Explain the three types of corporate bond, including why the premium bond gains the holder twice.
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Ordinary bond: paid at face value, interest on face value, face value returned at maturity.
Redeemable with an issue premium: the holder pays less than nominal — for example 900 SAR for a 1,000 SAR bond — but interest is calculated on the 1,000 nominal value, and the 100 SAR difference is paid back at maturity. So the holder gains twice: interest on money never paid, and the premium.
Guaranteed bond: paid at face value and backed by a personal guarantee (a government or a bank) or a real guarantee (a mortgage on the company's real estate).
5. Define bonds and explain how their characteristics compare with those of shares.
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Bonds are transferable deeds issued by companies or governments which represent long-term loans for incremental financial revenue, usually allocated by public subscription.
They carry the same four characteristics as shares: equal in value, a nominal value, transferable, and indivisible against the company (E.N.T.I.). The traits match, but the substance is the opposite: a bond is debt, not ownership.