Question 1

What are debentures?

Accepted Answer

Debentures are unsec

Question 2

Which of the following statements concerning the use of sinking funds to repurchase a bond issueis NOT true?

Accepted Answer

A)  Payments from the sinking fund are used to repurchase bonds. 
B)  The firm makes regular payments into a sinking fund administered by a trustee over the life of the bond. 
C)  The firm can reduce the amount of outstanding debt without affecting the cash flows of the remaining bonds. 
D)  Bonds can be issued with a sinking fund provision or a call provision, but not both. 
A)  Payments from the sinking fund are used to repurchase bonds. 
B)  The firm makes regular payments into a sinking fund administered by a trustee over the life of the bond. 
C)  The firm can reduce the amount of outstanding debt without affecting the cash flows of the remaining bonds. 
D)  Bonds can be issued with a sinking fund provision or a call provision, but not both.

Question 3

Kruller A.G. issues a bond that is offered for sale simultaneously in Europe, the United States, and Japan. Which of the following best describes this bond?

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 4

What are the implications of stronger bond covenants?

Accepted Answer

While equity holders may prefe

Question 5

What are bond covenants?

Accepted Answer

Bond covenants are restrictive

Question 6

By definition, a corporate bond is any form of debt security?

Accepted Answer

A) True 
 B)False

Question 7

In which of the following situations would the yield to worst for a certain bond be that bond's yield to call? I. The bond's coupon payments are high relative to market yields. II. The bond price is at a discount. III. The likelihood of the bond being called is high.

Accepted Answer

A)  I only 
B)  II only 
C)  I and II 
D)  I and III 
A)  I only 
B)  II only 
C)  I and II 
D)  I and III

Question 8

A company issues a 10-year, callable bond at par with 8% annual coupon payments. The bond can be called at par in one year after issue or any time after that on a coupon payment date. The call price is $105 per $100 of face value. What is the yield to call if this bond is called in one year?

Accepted Answer

A)  13% 
B)  5% 
C)  8% 
D)  11% 
A)  13% 
B)  5% 
C)  8% 
D)  11%

Question 9

When a callable bond sells at a premium, the likelihood of a call is and the yield to worst is the yield to .

Accepted Answer

A)  low, maturity 
B)  high, maturity 
C)  low, call 
D)  high, call 
A)  low, maturity 
B)  high, maturity 
C)  low, call 
D)  high, call

Question 10

Convertible bonds have a provision that gives the bondholder an option to convert each bond owned into a fixed number of ordinary shares.

Accepted Answer

A) True 
 B)False

Question 11

A firm issues $500 million in straight bonds at an original issue discount of 1% and a coupon rate of 5%. The firm pays fees of 3% 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)  $480 million 
B)  $500 million 
C)  $495 million 
D)  $485 million 
A)  $480 million 
B)  $500 million 
C)  $495 million 
D)  $485 million

Question 12

A company issues a callable (at par) five-year, 7% coupon bond with annual coupon payments. The bond can be called at par in one year after release or any time after that on a coupon payment date. On release, it has a price of $110 per $100 of face value. What is the yield to worst of this bond when it is released?

Accepted Answer

A)  4.71% 
B)  2.73% 
C)  1.40% 
D)  3.00% 
A)  4.71% 
B)  2.73% 
C)  1.40% 
D)  3.00%

Question 13

Which of the following statements is FALSE?

Accepted Answer

A)  In a public offering, the indenture lays out the terms of the bond issue. 
B)  The face value or principal amount of the bond is denominated in standard increments, most often $10,000. 
C)  If a coupon bond is issued at a discount, it is called an original issue discount bond. 
D)  With registered bonds, on each coupon payment date, the bond issuer consults its list of registered owners and mails each owner a cheque (or directly deposits the coupon payment into the owner's brokerage account). 
A)  In a public offering, the indenture lays out the terms of the bond issue. 
B)  The face value or principal amount of the bond is denominated in standard increments, most often $10,000. 
C)  If a coupon bond is issued at a discount, it is called an original issue discount bond. 
D)  With registered bonds, on each coupon payment date, the bond issuer consults its list of registered owners and mails each owner a cheque (or directly deposits the coupon payment into the owner's brokerage account).

Question 14

Covenants in a bond contract restrict the actions that management of a firm can take that would benefit the debt holders of the firm at the expense of the equity holders of that firm.

Accepted Answer

A) True 
 B)False

What are debentures?

Which of the following statements concerning the use of sinking funds to repurchase a bond issueis NOT true?

Kruller A.G. issues a bond that is offered for sale simultaneously in Europe, the United States, and Japan. Which of the following best describes this bond?

What are the implications of stronger bond covenants?

What are bond covenants?

By definition, a corporate bond is any form of debt security?

In which of the following situations would the yield to worst for a certain bond be that bond's yield to call? I. The bond's coupon payments are high relative to market yields. II. The bond price is at a discount. III. The likelihood of the bond being called is high.

A company issues a 10-year, callable bond at par with 8% annual coupon payments. The bond can be called at par in one year after issue or any time after that on a coupon payment date. The call price is $105 per $100 of face value. What is the yield to call if this bond is called in one year?

When a callable bond sells at a premium, the likelihood of a call is and the yield to worst is the yield to .

Convertible bonds have a provision that gives the bondholder an option to convert each bond owned into a fixed number of ordinary shares.

A firm issues $500 million in straight bonds at an original issue discount of 1% and a coupon rate of 5%. The firm pays fees of 3% on the face value of the bonds. What is the net amount of funds that the debt issue will provide for the firm?

Which of the following statements is FALSE?

Covenants in a bond contract restrict the actions that management of a firm can take that would benefit the debt holders of the firm at the expense of the equity holders of that firm.

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

What are debentures?

Which of the following statements concerning the use of sinking funds to repurchase a bond issueis NOT true?

Kruller A.G. issues a bond that is offered for sale simultaneously in Europe, the United States, and Japan. Which of the following best describes this bond?

What are the implications of stronger bond covenants?

What are bond covenants?

By definition, a corporate bond is any form of debt security?

In which of the following situations would the yield to worst for a certain bond be that bond's yield to call? I. The bond's coupon payments are high relative to market yields. II. The bond price is at a discount. III. The likelihood of the bond being called is high.

A company issues a 10-year, callable bond at par with 8% annual coupon payments. The bond can be called at par in one year after issue or any time after that on a coupon payment date. The call price is $105 per $100 of face value. What is the yield to call if this bond is called in one year?

When a callable bond sells at a premium, the likelihood of a call is and the yield to worst is the yield to .

Convertible bonds have a provision that gives the bondholder an option to convert each bond owned into a fixed number of ordinary shares.

A firm issues $500 million in straight bonds at an original issue discount of 1% and a coupon rate of 5%. The firm pays fees of 3% on the face value of the bonds. What is the net amount of funds that the debt issue will provide for the firm?

Which of the following statements is FALSE?

Covenants in a bond contract restrict the actions that management of a firm can take that would benefit the debt holders of the firm at the expense of the equity holders of that firm.

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