Question

3. Which of the following accounts is not a liability on the balance sheet (circle one) (2 pts)? A. Accounts Payable B. Prepaid Expenses C. Deferred Revenues D. Accrued Liabilities 4. A company borrows $250,000 for 3 months at an annual interest rate of 5 percent. What is the interest on the note for the loan period (circle one) (2 pts)? A. 12,500 B. 37,500 C. 3,125 D. 5,723 5. Which of the following is not an advantage of financing a company with bonds (circle one) (2 pts)? A. Stockholders maintain control because bonds are debt, not equity. B. Interest expense is tax deductible. C. Decreases risk of bankruptcy as creditors cannot force legal action. D. The return to shareholders can be positive if money is borrowed at a low interest rate and invested to earn a higher rate. 6. All other things equal, which of these bonds would an investor demand the highest interest rate (i.e. which one would an investor least want) (circle one) (2 pts)? A Unsecured bond B. Secured bond C. Callable bond D. Convertible bond 7, On January 1, 2016, Home Depot issues $10,000 in bonds having an 8% annual stated rate of interest. The bonds mature in 3 years and pay interest semiannually. The annual market rate of interest for companies with similar credit ratings as Home Depot is 9%. Home Depot's bonds will: (circle one) (2 pts)? A. sell at a premium B. sell at a discount C. sell at par D. be remade with a 9% interest rate
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