POF10

What is the main source of external long-term financing for corporations?

• Credit unions

• Capital markets

• Insurance companies

• Banks

What are the major characteristics of preferred stock and common stock?

What is the main difference between secured obligations and unsecured obligations in corporate debt?

• Unsecured obligations have lower bond ratings

• Secured obligations have collateral backing

• Unsecured obligations have priority claims on assets

• Secured obligations have higher interest rates

What is the purpose of bond covenants?

• To provide voting rights to bondholders

• To allow the firm to default on payments

• To protect the bondholders' stake in the firm

• To increase the interest rates on bonds

What is the significance of bond ratings?

• To specify the coupon rate of the bond

• To determine the maturity date of the bond

• To assess the expected returns on the bond

• To indicate the likelihood of default on the bond issue

What are Eurodollar bonds?

• Bonds issued in Europe

• Bonds sold exclusively in the United States

• Dollar-denominated bonds sold outside the United States

• Bonds denominated in Euros

What is the main reason for seeking a high bond rating for new issues?

• To lower the coupon rates on bonds

• To attract conservative investors

• To increase the interest expense for the issuer

• To avoid SEC scrutiny

Why have junk bonds gained a spot in many investment portfolios?

What are Yankee bonds?

• Bonds issued in Europe by American companies

• U.S. dollar denominated bonds issued in the United States by a foreign issuer

• Bonds issued by the World Bank

• Bonds issued by the U.S. government

What is the purpose of a ladder strategy in bond investing?

• To invest in bonds with the lowest credit ratings

• To focus investments on short-term bonds

• To invest in bonds with the highest interest rates

• To spread investments across bonds with different maturities