24. A___________ is generally defined as a long-term debt with an initial maturity of 10 years...
24. A___________ is generally defined as a long-term debt with an initial maturity of 10 years or less, whereas a___________ is a long-term debt with an initial maturity of more than 10 years.
A.Note; bond
B.Bond; note
C.Unfunded debt; note
D.Note; unfunded debt
25.True or False. Compounding during the year can lead to a significant difference between the quoted rate and the effective annual rate.A.TrueB.False
26. Suppose XYZ Corporation wants to issue a $1,000 bond with 20years to maturity. This bond has an annual coupon rate of 10%. Similar bonds have a yield to maturity of 10%. What is the present value of coupons?
A.$ 14.86
B.$ 148.64
C.$ 491.57
D.$ 851.36
27. Use the information provided in question 26. What is the present value of face value?
A.$ 83.33
B.$ 148.64
C.$ 851.36
D.$ 909.09
28. In class, we talked about the differences between debt and equity. True or False: Common shareholders do not have voting power, whereas creditors vote for the board of directors and other issues.
A.True
B.False
Homework Answers
24. Correct Option : A.Note; bond
25) TRUE
26)Correct option :D.$ 851.36
Explanation :
| a | Annual Interest Amount | $ 100.00 |
| ($1000*10%) | ||
| b | PV Annuity Factor for (20 Years,10%) | 8.513564 |
| c | Present Value Of Annual Interest (a*b) | $ 851.36 |
27) Correct Option :B.$ 148.64
| d | Redemption Value | $ 1,000.00 |
| e | PV Factor Of (20 Years,10%) | 0.14864 |
| g | Present Value Of Redemption Amount (d*e) | $ 148.64 |
28) False.
Common shareholders have voting power, whereas creditors do not have right to vote for the board of directors and other issues.
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