Question

1. Indicate which of the following statements are false. On Friday, 10,000 bonds issued by Glorious Vending were bought by a variety of investors for $1,000 per bond. If Glorious Vending received $10 million from the sale of these bonds, then the 10,000 bonds were more likely sold on the primary market than the secondary market. If Donatello Company is performing very poorly and the firm fails to make promised coupon payments to bondholders, then the bondholders can take legal recourse against the firm. On Friday, 10,000 bonds issued by Glorious Vending were bought by a variety of investors for $1,000 per bond. If Glorious Vending received $0 from the sale of these bonds, then the 10,000 bonds were more likely sold on the primary market than the secondary market. On Friday, 10,000 bonds issued by Glorious Vending were bought by a variety of investors for $1,000 per bond. If Glorious Vending received $10 million from the sale of these bonds, then the 10,000 bonds were more likely sold on the secondary market than the primary market. On Friday, 10,000 bonds issued by Glorious Vending were bought by a variety of investors for $1,000 per bond. If Glorious Vending received $0 from the sale of these bonds, then the 10,000 bonds were more likely sold on the secondary market than the primary market. Foreign countries, states, cities, counties, corporations, and the U.S. government are all entities that issue bonds. Note that this statement is true if all six entities issue bonds and that this statement is false if one or more of the six entities does not issue bonds. If a company performs very well, investors in that company’s bonds are likely to receive a higher coupon payment than the coupon payment indicated by the bond’s coupon rate, face value, and frequency of coupon payments (annual or semi-annual). If Donatello Company is performing very poorly and the firm fails to make promised coupon payments to bondholders, then the bondholders can not take legal recourse against the firm. If a company performs very poorly, investors in that company’s bonds may receive a lower coupon payment than the coupon payment indicated by the bond’s coupon rate, face value, and frequency of coupon payments (annual or semi-annual).

Answer 1

1.True, yes it’s true that if the company issues bonds and all the bonds are brought by the various investors and the full issue money is received, then it is implied that all bonds are sold in primary market than secondary market.

2.True, the bondholders have right to take legal action against the company if it fails to make payment of coupon and face value of the bond, also can force the company for bankruptcy.

3.False, if the company has issued the bonds and all bonds are brought by the various investor the company should receive the face value of bond that is 10 M in this case.

4.False, As the bonds will be first issued in primary market through public offer and if it is unable to sell all the bonds in primary market, it will approach secondary market through middleman to sell its bonds.

5.False, it cannot receive $0, when all the bonds are brought either from primary market or secondary market.

6.True, Foreign countries, states, cities, counties, corporations, and the U.S. government are all entities that issue bonds

7.False, the rate of coupons remain fixed throughout and the company performance does not impact the earning of the bond unless there is specifically mention in the bond to receive over and above the fixed coupon rate.

8.False, the bond holders can take legal actions in the time of non-payment of coupon money.

9.False, the coupon rate on the bond is fixed, whether company makes good earnings or not unlike shareholder they are bound to pay the coupon at rate mentioned in bond.