6L For shahinmermaid
blakli
6l-f.docxQuestion 1
1.
The indenture is a contract between the issuer and lenders that does all the following except:
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a. specifies the manner in which the principal must be repaid |
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b. details the nature of the debt issue |
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c. gives management's expectations about return of the proceeds |
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d. lists any restrictive covenants |
0.4 points
Question 2
1.
Preferred stock has a priority over common stock with regard to the company's
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a. assets |
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b. voting rights |
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c. dividends |
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d. assets and dividends |
0.4 points
Question 3
1.
Debt is usually issued with a par value of
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a. $500. |
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b. $0. |
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c. $1000. |
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d. $5000. |
0.4 points
Question 4
1.
The yield-to-maturity of a bond with a finite maturity date is a function of all of the following variables except:
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a. the current price |
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b. the required rate of return on the bond |
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c. the uniform annual interest payments |
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d. the maturity value |
0.4 points
Question 5
1.
There are consequences associated with not paying interest to bondholders. Which of the following apply? I. Not paying an interest payment automatically puts the company in default making the entire loan due. II. Interest on debt is not required to be paid, but the corporation generally pays it for public relations reasons.
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a. I only |
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b. II only |
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c. Both I and II |
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d. Neither I nor II |
0.4 points
Question 6
1.
The ____ the investor's required rate of return on a bond, the ____ will be the value of the bond to the investor.
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a. lower, higher |
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b. higher, higher |
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c. lower, lower |
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d. None of the above |
0.4 points
Question 7
1.
When the required rate of return is ____ the coupon rate, the bond will sell at a discount.
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a. less than |
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b. greater than |
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c. the same as |
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d. equal to |
0.4 points
Question 8
1.
The value of a perpetual bond is equal to the annual interest payment divided by the:
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a. risk-free rate |
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b. required rate of return |
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c. bank interest rate |
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d. after-tax historical cost of capital |
0.4 points
Question 9
1.
If a firm could sell a mortgage bond at an 8% interest rate, it could sell an otherwise identical debenture at
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a. a rate less than 8% |
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b. 8% |
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c. a rate greater than 8% |
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d. cannot be determined |
0.4 points
Question 10
1.
Rank in ascending order (lowest to highest) the relative risk associated with holding the preferred stock, common stock and bonds of a firm:
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a. preferred stock, bonds, common stock |
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b. bonds, common stock, preferred stock |
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c. common stock, preferred stock, bonds |
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d. bonds, preferred stock, common stock |
0.4 points
Question 11
1.
Which of the following statements concerning preferred stocks is true?
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a. Preferred stockholders have a prior claim on the income and assets of the firm as compared to the claims of lenders. |
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b. Preferred stock dividends per share are normally increased as the earnings of the firm increase. |
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c. Preferred dividends per share are usually not cut or suspended unless the firm is faced with serious financial problems. |
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d. The par value of a stock is always the same as the initial selling price. |
0.4 points
Question 12
1.
Junk bonds are
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a. usually rated Ba or higher |
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b. are issued by firms with a high debt ratio |
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c. issued with coupon rates at least 8 percentage points or more above the highest quality issues |
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d. are issued by firms with a low debt ratio |
0.4 points
Question 13
1.
A Treasury bill with 182 days to maturity is quoted at 5.62 bid, 5.60 asked, and an asked yield of 5.84. How much would you pay for this security?
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a. $9,440 |
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b. $9,720 |
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c. $9,708 |
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d. $9,438 |
0.4 points
Question 14
1.
There is a(n) ____ relationship between the value of a bond and its required rate of return.
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a. direct |
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b. distant |
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c. inverse |
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d. turgid |
0.4 points
Question 15
1.
The call feature of a long-term bond
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a. is an optional retirement provision |
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b. states the call price |
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c. allows the issuer to replace a high coupon bond with one with a lower coupon bond |
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d. all the above are correct |
