Exam 20: Debt Financing

Miller Mining has €30 million in land value and €15 million in mortgage bonds issued on the property.Given that the indenture does not limit the amount of additional bonds that can be issued, the company issues an additional €10 million in mortgage bonds against the property.If Miller is forced to liquidate its property for €20 million, and the company has no other assets, how much will the original bondholders receive?

Long term debt that is privately placed debt is directly placed with:

Corporations, typically, have the right to repurchase a debt issue prior to maturity by paying the face value of the bond plus:

Zero coupon bonds eliminate interest rate risk in some cases by:

Zeros are bonds that have zero:

Debt ratings issued by companies such as Moody's and Standard and Poor's depend on:

An income bond is unique in at least one characteristic.Explain what is different about income bonds and why they exist.Why are they not more popular?

Aspen Divestiture Corporation, a firm speculating in corporate reorganizations, has bonds outstanding that were originally issued at par, but are now selling, on September 19, 2006, for €1,050 per €1,000 face value.The bonds have a stated interest rate of 8% and mature on January 1, 2016.The bonds pay interest semi-annually on July 1 and January 1 each year.Suppose that an investor buys a €1,000 face value bond on September 1, 2006.What euro amount will the investor pay to the seller on September 1? How much interest will the investor receive on January 1, 2007?

The costs associated with a non-investment grade issue are:

Long-term debt is sometimes called:

Accrued interest must be paid annually on a 7% coupon paying €1,000 par bond bought between interest dates.On January 1st you bought a bond issues by the Hardy Can Company with interest Dates of April 15th and September 15th.Approximately, how much of the amount you paid for the Bond was accrued interest?

Corporations, typically, have the right to repurchase a debt issue prior to maturity at a fixed price, but only after some number of years have passed.Such debt is said to feature:

The main difference between an open-end and closed-end mortgage trust indenture is that:

Studies have shown that around the announcement of bond rating changes:

The call policy that maximizes shareholder wealth is to call a bond issue when the:

Which of the following bonds is secured by corporate assets?

The choice of whether a private placement or a public bond issue is undertaken depends on many factors.Three elements of primary concern are registration, interest rates and covenants.How do these affect the choice and why might a private placement be chosen?

Junk bond market financing became more important in mergers and corporate restructurings because:

Floating rate bonds are bonds with:

If a bond was issued at par, the quoted price of the bond will not necessarily equal the par value of the bond after issuance because: