Question 1

A bond has a face value of $10,000 and a conversion ratio of 265. The stock is currently trading at $38.80. What is the conversion price?

Accepted Answer

A)  $37.74 
B)  $1.56 
C)  $5.84 
D)  $25.73 
A)  $37.74 
B)  $1.56 
C)  $5.84 
D)  $25.73

Question 2

A firm issues $200 million in straight bonds at par and a coupon rate of 7%. The firm pays fees of 2.5% on the face value of the bonds. What is the net amount of funds that the debt issue will provide for the firm?

Accepted Answer

A)  $195 million 
B)  $186 million 
C)  $205 million 
D)  $200 million 
A)  $195 million 
B)  $186 million 
C)  $205 million 
D)  $200 million

Question 3

If a bond covenant is not met, then the bond goes into technical default and the bondholder can demand immediate repayment or force the company to renegotiate the terms of the bond.

Accepted Answer

A) True 
 B)False

Question 4

In terms of public offerings of bonds, what is a prospectus?

Accepted Answer

A)  a formal contract that specifies the firm's obligations to the bondholders 
B)  a schedule of the fees charged by the underwriting company 
C)  a list of the duties of the trust company representing the bondholders' interests 
D)  a memorandum that must be produced to describe the details of a bond offering 
A)  a formal contract that specifies the firm's obligations to the bondholders 
B)  a schedule of the fees charged by the underwriting company 
C)  a list of the duties of the trust company representing the bondholders' interests 
D)  a memorandum that must be produced to describe the details of a bond offering

Question 5

Which of the following best describes a bond that is issued by a local entity and traded in a localmarket, but may be purchased by foreigners?

Accepted Answer

A)  a domestic bond 
B)  a foreign bond 
C)  a Eurobond 
D)  a global bond 
A)  a domestic bond 
B)  a foreign bond 
C)  a Eurobond 
D)  a global bond

Question 6

Which of the following is an advantage of a public bond issue over private placement?

Accepted Answer

A)  It is less costly to issue. 
B)  It can be tailored to the particular situation. 
C)  It is freely tradable on the bond market. 
D)  It does not need to be registered with ASIC. 
A)  It is less costly to issue. 
B)  It can be tailored to the particular situation. 
C)  It is freely tradable on the bond market. 
D)  It does not need to be registered with ASIC.

Question 7

What kind of unsecured corporate debt has a maturity of less than ten years?

Accepted Answer

A)  notes 
B)  mortgage bonds 
C)  asset-backed bonds 
D)  debentures 
A)  notes 
B)  mortgage bonds 
C)  asset-backed bonds 
D)  debentures

Question 8

When a callable bond sells at a discount, the bond's coupon rate is _ than market yields and the yield to worst is the yield to .

Accepted Answer

A)  lower, maturity 
B)  lower, call 
C)  high, maturity 
D)  higher, call 
A)  lower, maturity 
B)  lower, call 
C)  high, maturity 
D)  higher, call

Question 9

Private debt cannot be in the form of bonds?

Accepted Answer

A) True 
 B)False

Question 10

Coupon: 0% Conversion Ratio: 158 shares per $1000 principal amount Call Date: 1 July 2012 Maturity: 1 July 2019 A firm issues the convertible debt shown above. The price of stock in this company on 1 July 2012 is $6.58. What is the minimum call price that would make a bondholder prefer to accept the call rather than convert?

Accepted Answer

A)  par plus 6% 
B)  par plus 0.6% 
C)  par 
D)  par plus 4% 
A)  par plus 6% 
B)  par plus 0.6% 
C)  par 
D)  par plus 4%

Question 11

Eurobonds issued in France could NOT be issued in which of the following denominations?

Accepted Answer

A)  yen 
B)  U.S. dollars 
C)  pounds sterling 
D)  euros 
A)  yen 
B)  U.S. dollars 
C)  pounds sterling 
D)  euros

Question 12

What kind of corporate debt can be secured by any specified assets?

Accepted Answer

A)  notes 
B)  mortgage bonds 
C)  asset-backed bonds 
D)  debentures 
A)  notes 
B)  mortgage bonds 
C)  asset-backed bonds 
D)  debentures

Question 13

Supreme Industries issues the following announcement to holders of an issue of callable, convertible notes: "Prior to the close of business on 17 May 2012, holders may convert their Notes into Supreme Industries ordinary shares at 28.45 shares per $1000 principal amount of the Notes. Cash will be paid in lieu of fractional shares. On 16 April 2012, the last reported sale price of Supreme Industries shares on the ASX was $22.51 per share." If on 17 May, Supreme Industries is trading as $24.80, what is the value of ordinary shares a holder of a $1,000 note would receive?

Accepted Answer

A)  $868.00 
B)  $787.51 
C)  $791.21 
D)  $871.70 
A)  $868.00 
B)  $787.51 
C)  $791.21 
D)  $871.70

Question 14

What is yield to call?

Accepted Answer

For callable bonds, yield to c

Question 15

A bond has a face value of $100 and a conversion ratio of 28. What is the conversion price?

Accepted Answer

A)  $28.00 
B)  $2.80 
C)  $3.57 
D)  $0.28 
A)  $28.00 
B)  $2.80 
C)  $3.57 
D)  $0.28

Question 16

A firm issues $200 million in straight bonds at an original issue discount of 0.75% and a coupon rate of 7%. The firm pays fees of 2.5% on the face value of the bonds. The net amount of funds that the debt issue will provide for the firm is closest to which of the following?

Accepted Answer

A)  $193,500,000 
B)  $180,375,000 
C)  $178,257,200 
D)  $185,000,000 
A)  $193,500,000 
B)  $180,375,000 
C)  $178,257,200 
D)  $185,000,000

Question 17

Which of the following statements is FALSE?

Accepted Answer

A)  The yield to call (YT
C)  is the annual yield of a callable bond assuming that the bond is called at the earliest opportunity. 
B)  Because the price of a callable bond is higher than the price of an otherwise identical non-callable bond, the yield to maturity of a callable bond will be lower than the yield to maturity for its non-callable counterpart. 
C)  The assumption that underlies the yield calculation of a callable bond-that it will not be called-is not always realistic, so bond traders often quote the yield to call. 
D)  We can think of the yield to maturity of a callable bond as the interest rate the bondholder receives if the bond is not called and repaid in full. 
A)  The yield to call (YT
C)  is the annual yield of a callable bond assuming that the bond is called at the earliest opportunity. 
B)  Because the price of a callable bond is higher than the price of an otherwise identical non-callable bond, the yield to maturity of a callable bond will be lower than the yield to maturity for its non-callable counterpart. 
C)  The assumption that underlies the yield calculation of a callable bond-that it will not be called-is not always realistic, so bond traders often quote the yield to call. 
D)  We can think of the yield to maturity of a callable bond as the interest rate the bondholder receives if the bond is not called and repaid in full.

Question 18

Athelstone Realty issues debt with a maturity of 20 years. In the case of bankruptcy, holders of this debt may claim the property held by Athelstone Realty. Which of the following best describes this type of corporate debt?

Accepted Answer

A)  an asset-backed bond 
B)  a mortgage bond 
C)  a debenture 
D)  a note 
A)  an asset-backed bond 
B)  a mortgage bond 
C)  a debenture 
D)  a note

Question 19

A callable bond will typically have a yield than an otherwise identical bond without a call feature because .

Accepted Answer

A)  lower, the firm loses flexibility with a callable bond 
B)  higher, the option to call a bond is valuable 
C)  lower, the option to call a bond is valuable 
D)  higher, the firm loses flexibility with a callable bond 
A)  lower, the firm loses flexibility with a callable bond 
B)  higher, the option to call a bond is valuable 
C)  lower, the option to call a bond is valuable 
D)  higher, the firm loses flexibility with a callable bond

Question 20

The face value of bonds are denominated most commonly in which of the following standard increments?

Accepted Answer

A)  $100 
B)  $10,000 
C)  $1000 
D)  $10 
A)  $100 
B)  $10,000 
C)  $1000 
D)  $10

A bond has a face value of $10,000 and a conversion ratio of 265. The stock is currently trading at $38.80. What is the conversion price?

A firm issues $200 million in straight bonds at par and a coupon rate of 7%. The firm pays fees of 2.5% on the face value of the bonds. What is the net amount of funds that the debt issue will provide for the firm?

If a bond covenant is not met, then the bond goes into technical default and the bondholder can demand immediate repayment or force the company to renegotiate the terms of the bond.

In terms of public offerings of bonds, what is a prospectus?

Which of the following best describes a bond that is issued by a local entity and traded in a localmarket, but may be purchased by foreigners?

Which of the following is an advantage of a public bond issue over private placement?

What kind of unsecured corporate debt has a maturity of less than ten years?

When a callable bond sells at a discount, the bond's coupon rate is _ than market yields and the yield to worst is the yield to .

Private debt cannot be in the form of bonds?

Eurobonds issued in France could NOT be issued in which of the following denominations?

What kind of corporate debt can be secured by any specified assets?

What is yield to call?

A bond has a face value of $100 and a conversion ratio of 28. What is the conversion price?

A firm issues $200 million in straight bonds at an original issue discount of 0.75% and a coupon rate of 7%. The firm pays fees of 2.5% on the face value of the bonds. The net amount of funds that the debt issue will provide for the firm is closest to which of the following?

Which of the following statements is FALSE?

Athelstone Realty issues debt with a maturity of 20 years. In the case of bankruptcy, holders of this debt may claim the property held by Athelstone Realty. Which of the following best describes this type of corporate debt?

A callable bond will typically have a yield than an otherwise identical bond without a call feature because .

The face value of bonds are denominated most commonly in which of the following standard increments?

Corporate Finance and the Financial Manager

Introduction to Financial Statement Analysis

Time Value of Money: an Introduction

Time Value of Money: Valuing Cash Flow Streams

Interest Rates

Bond Valuation

Share Valuation: the Dividend-Discount Model

Investment Decision Rules

Fundamentals of Capital Budgeting

Share Valuation: a Second Look

Risk and Return in Capital Markets

Systematic Risk and the Equity Risk Premium

The Cost of Capital

Raising Capital

Capital Structure

Payout Policy

Filters

Exam 15: Debt Financing

A bond has a face value of $10,000 and a conversion ratio of 265. The stock is currently trading at $38.80. What is the conversion price?

A firm issues $200 million in straight bonds at par and a coupon rate of 7%. The firm pays fees of 2.5% on the face value of the bonds. What is the net amount of funds that the debt issue will provide for the firm?

If a bond covenant is not met, then the bond goes into technical default and the bondholder can demand immediate repayment or force the company to renegotiate the terms of the bond.

In terms of public offerings of bonds, what is a prospectus?

Which of the following best describes a bond that is issued by a local entity and traded in a localmarket, but may be purchased by foreigners?

Which of the following is an advantage of a public bond issue over private placement?

What kind of unsecured corporate debt has a maturity of less than ten years?

When a callable bond sells at a discount, the bond's coupon rate is _ than market yields and the yield to worst is the yield to .

Private debt cannot be in the form of bonds?

Eurobonds issued in France could NOT be issued in which of the following denominations?

What kind of corporate debt can be secured by any specified assets?

What is yield to call?

A bond has a face value of $100 and a conversion ratio of 28. What is the conversion price?

A firm issues $200 million in straight bonds at an original issue discount of 0.75% and a coupon rate of 7%. The firm pays fees of 2.5% on the face value of the bonds. The net amount of funds that the debt issue will provide for the firm is closest to which of the following?

Which of the following statements is FALSE?

Athelstone Realty issues debt with a maturity of 20 years. In the case of bankruptcy, holders of this debt may claim the property held by Athelstone Realty. Which of the following best describes this type of corporate debt?

A callable bond will typically have a yield than an otherwise identical bond without a call feature because .

The face value of bonds are denominated most commonly in which of the following standard increments?

Corporate Finance and the Financial Manager

Introduction to Financial Statement Analysis

Time Value of Money: an Introduction

Time Value of Money: Valuing Cash Flow Streams

Interest Rates

Bond Valuation

Share Valuation: the Dividend-Discount Model

Investment Decision Rules

Fundamentals of Capital Budgeting

Share Valuation: a Second Look

Risk and Return in Capital Markets

Systematic Risk and the Equity Risk Premium

The Cost of Capital

Raising Capital

Capital Structure

Payout Policy

Filters