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WorksheetsThe Principle of Financing
Total questions: 10
Worksheet time: 5mins
A bond issue may be retired by:
A. calling the bonds if there is a call feature.
B. converting the bonds (if convertible) into common stock.
C. making a single-sum payment at final maturity.
D. All of the above.
Protective covenants are:
A. to protect employees.
B. to protect the interests of the company.
C. to protect shareholders.
D. to protect bondholders.
Which of the following offer the investor the most protection?
A. First-mortgage (secured) bonds
B. Debentures
C. Convertible bonds
D. Floating Rate bonds
A company refunds its bonds for any of the following reasons EXCEPT for:
A. to eliminate restrictive covenants.
B. to reduce interest costs.
C. to show higher reported profits.
D. to issue new bonds at higher rate of interest.
Preferred shareholders' claims on assets and income of a firm come……. those of creditors ……… those of common shareholders.
A. before; and also before
B. after; but before
C. after; and also after
D. equal to; and equal to
Dual classes of …… are common in new ventures where promotional…… usually goes to the founders.
A. bonds; bonds
B. stock; preferred stock
C. stock; common stock
D. warrants; warrants
In the United States, most bonds pay interest ……. a year, while many European bonds pay interest ………. a year.
A. once; twice
B. twice; once
C. once; once
D. twice; twice
If the intrinsic value of a stock is greater than its market value, which of the following is a reasonable conclusion?
A. The stock has a low level of risk.
B. The stock offers a high dividend payout ratio.
C. The market is undervaluing the stock.
D. The market is overvaluing the stock.
In an initial public offering, the subscription price is generally:
A. set equal to the current market price of the stock.
B. set below the current market price of the stock.
C. set above the current market price of the stock.
D. Cannot say
To say that there is "asymmetric information" in the issuing of common stock or debt means that :
A. investors have nearly perfect information.
B. the markets have nearly perfect information.
C. investors have more accurate information than management has.
D. management has more accurate information than investors have.
