Exam 24: The Many Different Kinds of Debt
Exam 1: Introduction to Corporate Finance57 Questions
Exam 2: How to Calculate Present Values103 Questions
Exam 3: Valuing Bonds60 Questions
Exam 4: The Value of Common Stocks67 Questions
Exam 5: Net Present Value and Other Investment Criteria74 Questions
Exam 6: Making Investment Decisions With the Net Present Value Rule76 Questions
Exam 7: Introduction to Risk and Return89 Questions
Exam 8: Portfolio Theory and the Capital Asset Pricing Model86 Questions
Exam 9: Risk and the Cost of Capital75 Questions
Exam 10: Project Analysis75 Questions
Exam 11: Investment, Strategy, and Economic Rents70 Questions
Exam 12: Agency Problems, Compensation, and Performance Measurement67 Questions
Exam 13: Efficient Markets and Behavioral Finance63 Questions
Exam 14: An Overview of Corporate Financing72 Questions
Exam 15: How Corporations Issue Securities70 Questions
Exam 16: Payout Policy73 Questions
Exam 17: Does Debt Policy Matter81 Questions
Exam 18: How Much Should a Corporation Borrow75 Questions
Exam 19: Financing and Valuation84 Questions
Exam 20: Understanding Options76 Questions
Exam 21: Valuing Options75 Questions
Exam 22: Real Options59 Questions
Exam 23: Credit Risk and the Value of Corporate Debt53 Questions
Exam 24: The Many Different Kinds of Debt98 Questions
Exam 25: Leasing55 Questions
Exam 26: Managing Risk65 Questions
Exam 27: Managing International Risks64 Questions
Exam 28: Financial Analysis57 Questions
Exam 29: Financial Planning59 Questions
Exam 30: Working Capital Management90 Questions
Exam 31: Mergers77 Questions
Exam 32: Corporate Restructuring70 Questions
Exam 33: Governance and Corporate Control Around the World54 Questions
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Reverse floaters are floating rate bonds that pay a higher rate of interest when other interest rates fall and a lower rate when other rates rise.
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(True/False)
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Correct Answer:
True
Explain the differences between a bond issued only in the United States and Eurobond issues.
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(Essay)
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Correct Answer:
There are two basic differences.First,a bond issued in the United States will generally have a fixed interest rate,while a Eurobond will usually have a floating interest rate tied to LIBOR.Second,bonds sold in the United States are almost always registered,which means that the company's registrar records the owner's name; most Eurobonds are sold in bearer form.
The recovery rate on defaulting debt is the least for the following type of debt:
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(Multiple Choice)
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Correct Answer:
D
Issuing convertible bonds or bonds with warrants is useful for a company of unknown risk because:
(Multiple Choice)
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A 5% debenture (face value = $1000)pays interest on June 30 and December 31.It is callable at a price of 105% together with accrued interest.Suppose the company decides to call the bonds on September 30.What amount must it pay for each bond?
(Multiple Choice)
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Many times warrants may be issued on their own and do not have to be issued in conjunction with other securities.
(True/False)
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Very large bond issues that are marketed both internationally as well as in individual domestic markets are called:
(Multiple Choice)
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Two major differences between a warrant and a call option are:
I.warrants are contracts outside of the firm while options are within the firm;
II.warrants have long maturities while options are usually short maturities;
III.warrant exercise dilutes the value of equity while options exercise usually does not
(Multiple Choice)
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A firm may prefer to issue a convertible bond,as opposed to issuing equity,because:
I.a convertible issue sends a better signal to investors than an issue of common stock;
II.an announcement of a stock issue generates worries of overvaluation and usually depresses the stock price;
III.a convertible issue shows the management's willingness to take a chance that the stock price will rise enough to lead to conversion and also signals management's confidence in the future
(Multiple Choice)
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Sinking funds reduce the average life of a bond and thereby reduce the risk of a default.
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