Question

Chapter 9 Homework Assignment

1) A written promise to repay a loan principal plus interest at a specific future date is

A) a promissory note.

B) a line of credit.

C) commercial paper.

D) a product warranty.

E) a returnable deposit.

2) ________ are subject to redemption before maturity at the option of the issuer.

A) Debentures

B) Mortgage bonds

C) Callable bonds

D) Sinking fund bonds

E) Convertible bonds

3) Convertible bonds are attractive to investors because

A) the issuing company cannot retire the bonds before maturity.

B) they can be converted into stock by the issuing company.

C) they usually carry a higher rate of interest than non-convertible bonds.

D) they usually carry a lower rate of interest than non-convertible bonds.

E) they can be converted into stock at the holder's option.

4) The cash proceeds received from issuing a bond are less than the face value of the bond. It is apparent that the bond was issued at

A) face value.

B) a premium.

C) a discount.

D) par value.

E) nominal value.

5) ________ are a form of long-term debt that is secured by the pledge of specific property.

A) Convertible bonds

B) Mortgage bonds

C) Callable bonds

D) Sinking fund bonds

E) Debentures

6) ________ are bonds whose holders have claims against only the assets that remain after the claims of the more senior general creditors are satisfied.

A) Subordinated debentures

B) Mortgage bonds

C) Callable bonds

D) Sinking fund bonds

E) Convertible bonds

7) ________ are subject to redemption before maturity at the option of the issuer.

A) Debentures

B) Mortgage bonds

C) Callable bonds

D) Sinking fund bonds

E) Convertible bonds

8) Convertible bonds are attractive to investors because

A) the issuing company cannot retire the bonds before maturity.

B) they can be converted into stock by the issuing company.

C) they usually carry a higher rate of interest than non-convertible bonds.

D) they usually carry a lower rate of interest than non-convertible bonds.

E) they can be converted into stock at the holder's option.

9) Bonds are often called ________ financial instruments or securities because they can be transferred from one lender to another.

A) private placement

B) negotiable

C) current liability

D) long term liability

E) sinking fund

10) Bonds are typically sold through

A) board of directors.

B) underwriters.

C) corporations.

D) commercial insurance companies.

E) None of the above

Answer 1

(1) A written promise to repay a loan principal plus interest at a specific future date is

(ans) Option (A) - a promissory note

(2) ________ are subject to redemption before maturity at the option of the issuer.

(ans) Option (C) - Callable bonds

(3) Convertible bonds are attractive to investors because

(ans) Option (B) - they can be converted into stock by the issuing company.

(4) The cash proceeds received from issuing a bond are less than the face value of the bond. It is apparent that the bond was issued at

(ans) Option (C) - a discount.

(5) ________ are a form of long-term debt that is secured by the pledge of specific property.

(ans) Option (B) - Mortgage bonds​​​​​​​

(6) ______ are bonds whose holders have claims against only the assets that remain after the claims of the more senior general creditors are satisfied.

(ans) Option (A) - Subordinated debentures

(7) ______ are subject to redemption before maturity at the option of the issuer.

(ans) Option (C) - Callable bonds​​​​​​​

(8) Convertible bonds are attractive to investors because

(ans) Option (B) - they can be converted into stock by the issuing company.

(9) Bonds are often called ________ financial instruments or securities because they can be transferred from one lender to another

(ans) Option (B) - negotiable​​​​​​​

(10) Bonds are typically sold through

(ans) Option (B) - underwriters.​​​​​​​