Question 1

If a company fails to meet the terms of the indenture, it is​

Accepted Answer

A)  ​bankrupt 
B)  ​in default 
C)  ​profitable 
D)  ​in registration 
A)  ​bankrupt 
B)  ​in default 
C)  ​profitable 
D)  ​in registration B

Question 2

Bonds may not be repurchased by the firm prior to maturity.​

Accepted Answer

A) True 
 B)False  False

Question 3

The interest paid by federal government bonds is not subject to federal income taxation.​

Accepted Answer

A) True 
 B)False  False

Question 4

Which of the following bonds is supported by collateral?​

Accepted Answer

A)  ​zero coupon bond 
B)  ​mortgage bond 
C)  ​debenture bond 
D)  ​income bond 
A)  ​zero coupon bond 
B)  ​mortgage bond 
C)  ​debenture bond 
D)  ​income bond

Question 5

The highest credit rating is triple A.​

Accepted Answer

A) True 
 B)False

Question 6

Equipment trust certificates issued by a firm should be safer than its debentures.​

Accepted Answer

A) True 
 B)False

Question 7

Interest is exempt from federal income taxation for

Accepted Answer

A)  ​equipment trust certificates​ 
B)  ​zero coupon bonds 
C)  ​federal bonds such as savings bonds 
D)  ​state of Florida bonds 
A)  ​equipment trust certificates​ 
B)  ​zero coupon bonds 
C)  ​federal bonds such as savings bonds 
D)  ​state of Florida bonds

Question 8

If a company defaults on its bonds,​

Accepted Answer

A)  ​subordinated debt is redeemed before senior debt 
B)  ​equipment trust certificates have an inferior position to income bonds 
C)  ​interest continues to accrue but may not be paid 
D)  ​debentures have a superior position to other bonds 
A)  ​subordinated debt is redeemed before senior debt 
B)  ​equipment trust certificates have an inferior position to income bonds 
C)  ​interest continues to accrue but may not be paid 
D)  ​debentures have a superior position to other bonds

Question 9

The document stating the terms of a bond is the indenture.​

Accepted Answer

A) True 
 B)False

Question 10

Many bonds have a call feature, which permits the firm to retire the bonds prior to maturity.​

Accepted Answer

A) True 
 B)False

Question 11

Which of the following bonds is supported by collateral?

Accepted Answer

A)  ​unsecured bonds 
B)  income bonds​ 
C)  equipment trust certificates​ 
D)  ​debentures 
A)  ​unsecured bonds 
B)  income bonds​ 
C)  equipment trust certificates​ 
D)  ​debentures

Question 12

Bonds may be retired prior to maturity by​
1) repurchases
2) a sinking fund
3) a call feature

Accepted Answer

A) 1 and 2​ 
B) ​1 and 3 
C) ​2 and 3 
D) ​all three 
A) 1 and 2​ 
B) ​1 and 3 
C) ​2 and 3 
D) ​all three

Question 13

All debentures are bonds but not all bonds are debentures.​

Accepted Answer

A) True 
 B)False

Question 14

A periodic payment to retire a debt is illustrative of a sinking fund.​

Accepted Answer

A) True 
 B)False

Question 15

Which of the following bonds are exempt from federal income taxation?​

Accepted Answer

A)  ​zero coupon bonds 
B)  ​debenture bonds 
C)  ​convertible bonds 
D)  ​municipal bonds 
A)  ​zero coupon bonds 
B)  ​debenture bonds 
C)  ​convertible bonds 
D)  ​municipal bonds

Question 16

Bonds secured by collateral tend to be safer than other bonds issued by the firm.​

Accepted Answer

A) True 
 B)False

Question 17

If a company enters bankruptcy court, bondholders should realize​

Accepted Answer

A)  ​subordinated debt is paid off at face value 
B)  ​convertible debt is superior because it may be converted into common stock 
C)  ​bondholders may lose their investments 
D)  ​stockholders have the superior position 
A)  ​subordinated debt is paid off at face value 
B)  ​convertible debt is superior because it may be converted into common stock 
C)  ​bondholders may lose their investments 
D)  ​stockholders have the superior position

Question 18

​Which of the following reduces the investor's risk associated with investing in bonds?
1) a sinking fund
2) a variable interest rate
3) a call feature

Accepted Answer

A) ​1 and 2 
B) ​1 and 3 
C) ​2 and 3 
D) ​1, 2, and 3 
A) ​1 and 2 
B) ​1 and 3 
C) ​2 and 3 
D) ​1, 2, and 3

Question 19

Bonds that are in default are given a B rating instead of an A rating.​

Accepted Answer

A) True 
 B)False

Question 20

A firm may retire bonds by purchasing the debt in the secondary markets.​

Accepted Answer

A) True 
 B)False

Exam 12: The Features of Long-Term Debt - Bonds

If a company fails to meet the terms of the indenture, it is​

Bonds may not be repurchased by the firm prior to maturity.​

The interest paid by federal government bonds is not subject to federal income taxation.​

Which of the following bonds is supported by collateral?​

The highest credit rating is triple A.​

Equipment trust certificates issued by a firm should be safer than its debentures.​

Interest is exempt from federal income taxation for

If a company defaults on its bonds,​

The document stating the terms of a bond is the indenture.​

Many bonds have a call feature, which permits the firm to retire the bonds prior to maturity.​

Which of the following bonds is supported by collateral?

Bonds may be retired prior to maturity by​ 1) repurchases 2) a sinking fund 3) a call feature

All debentures are bonds but not all bonds are debentures.​

A periodic payment to retire a debt is illustrative of a sinking fund.​

Which of the following bonds are exempt from federal income taxation?​

Bonds secured by collateral tend to be safer than other bonds issued by the firm.​

If a company enters bankruptcy court, bondholders should realize​

​Which of the following reduces the investor's risk associated with investing in bonds? 1) a sinking fund 2) a variable interest rate 3) a call feature

Bonds that are in default are given a B rating instead of an A rating.​

A firm may retire bonds by purchasing the debt in the secondary markets.​

The Role of Financial Markets and Financial Intermediaries

Investment Banking

Securities Markets

The Federal Reserve

International Currency Flows

The Time Value of Money

Risk and Its Measurement

Analysis of Financial Statements

The Features of Stock

Stock Valuation

Bond Pricing and Yields

Preferred Stock

Convertile Securities

Investment Returns

Investment Companies

Forms of Businss and Corporate Taxation

Break-Even Analysis and the Payback Period

Leverage

Cost of Capital

Capital Budgeting

Forecasting

Cash Budgeting

Management of Current Assets

Management of Short-Term Liabilities

Intermediate-Term Debt and Leasing

Options: Puts and Calls

Futures and Swaps

Filters

If a company fails to meet the terms of the indenture, it is

Bonds may not be repurchased by the firm prior to maturity.

The interest paid by federal government bonds is not subject to federal income taxation.

Which of the following bonds is supported by collateral?

The highest credit rating is triple A.

Equipment trust certificates issued by a firm should be safer than its debentures.

If a company defaults on its bonds,

The document stating the terms of a bond is the indenture.

Many bonds have a call feature, which permits the firm to retire the bonds prior to maturity.

Bonds may be retired prior to maturity by 1) repurchases 2) a sinking fund 3) a call feature

All debentures are bonds but not all bonds are debentures.

A periodic payment to retire a debt is illustrative of a sinking fund.

Which of the following bonds are exempt from federal income taxation?

Bonds secured by collateral tend to be safer than other bonds issued by the firm.

If a company enters bankruptcy court, bondholders should realize

Which of the following reduces the investor's risk associated with investing in bonds? 1) a sinking fund 2) a variable interest rate 3) a call feature

Bonds that are in default are given a B rating instead of an A rating.

A firm may retire bonds by purchasing the debt in the secondary markets.