FINC400 quiz 7
Question 1 of 25 |
4.0 Points |
A bond’s rating can depend on all of the following except
[removed] A.the corporation’s debt-equity ratio. |
[removed] B.the corporation’s size. |
[removed] C.the ability of the firm to make interest payments. |
[removed] D.the coupon rate on the bond. |
Question 2 of 25 |
The effect of a rights offering on a stockholder is
[removed] A.to increase his/her wealth. |
[removed] B.to increase his/her wealth only if the new stock is purchased. |
[removed] C.to decrease his/her wealth unless the stock is purchased. |
[removed] D.to decrease his/her wealth if nothing is done. |
Question 3 of 25 |
Preferred stock dividends are a deductible expense for a corporation.
[removed] A. True[removed] B. False |
Question 4 of 25 |
The costs of bond refunding are the call premium, and the underwriting costs on the old and new bond issue.
[removed] A. True[removed] B. False
Question 5 of 25 |
A “subordinated debenture”
[removed] A.must be transferred with the bond to which it is attached. |
[removed] B.is used mainly by railroad companies and usually specifies equipment as collateral. |
[removed] C.entitles the bondholder to purchase shares of common stock at a specific price. |
[removed] D.is an unsecured bond with an inferior claim on assets in the event of liquidation. |
Question 6 of 25 |
Stockholders always have preemptive rights when new issues of stock are offered.
[removed] A. True[removed] B. False
Question 7 of 25 |
Debentures are commonly issued by small companies.
[removed] A. True[removed] B. False
Question 8 of 25 |
The subscription rate is generally _______ than the rights-on price and _______ than the ex-rights price.
[removed] A.higher, higher |
[removed] B.higher, lower |
[removed] C.lower, higher |
[removed] D.lower, lower |
Question 9 of 25 |
Bondholders never have any control over the actions of a firm.
[removed] A. True[removed] B. False
Question 10 of 25 |
The increasing sophistication of individual investors has decreased the role of institutional investors in the stock market.
[removed] A. True[removed] B. False
Question 11 of 25 |
Stock purchased through a rights offering may carry lower margin requirements.
[removed] A. True[removed] B. False
Question 12 of 25 |
The term debenture refers to
[removed] A.long-term, secured debt. |
[removed] B.long-term, unsecured debt. |
[removed] C.the after-acquired property clause. |
[removed] D.a 100-page document covering the specific terms of the offering. |
Question 13 of 25 |
The difference between the initial bond price and the maturity value is amortized for tax purposes over the life of a zero-coupon bond.
[removed] A. True[removed] B. False
Question 14 of 25 |
With regard to interest rates and bond prices it can be said that
[removed] A.a 1% change in interest rates will cause a greater change in long-term bond prices than short-term prices. |
[removed] B.a 1% change in interest rates will cause a greater change in short-term bond prices than long-term prices. |
[removed] C.long-term rates are more volatile than short-term rates. |
[removed] D.a decrease in interest rates will cause bond prices to fall. |
Question 15 of 25 |
An increasing proportion of shares in the U.S. are owned by:
[removed] A.individual investors. |
[removed] B.corporations (Treasury Stock). |
[removed] C.institutions. |
[removed] D.governments. |
Question 16 of 254.0 Points
Under normal operating conditions, the board of directors is elected by [removed] A.the common stockholders. [removed] B.the preferred stockholders. [removed] C.the bondholders. [removed] D.two of the above. |
Question 17 of 25 |
If a corporate charter includes a provision for preemptive rights, the stockholders
[removed] A.must sell their stock to the company. |
[removed] B.get first option to buy additional issues of common stock. |
[removed] C.may purchase existing treasury stock. |
[removed] D.cannot utilize cumulative voting procedures. |
Question 18 of 25 |
The higher the bond rating
[removed] A.the higher the interest rate on a bond. |
[removed] B.the lower the interest rate on a bond. |
[removed] C.the higher the call premium. |
[removed] D.the lower the call premium |
Question 19 of 25 |
The purpose of cumulative voting is
[removed] A.to maintain majority control of the board of directors. |
[removed] B.to allow minority stockholders the possibility of a voice on the board of directors. |
[removed] C.to obstruct unfriendly mergers and takeover efforts. |
[removed] D.to prevent the dilution of common stock through pre-emptive rights offerings. |
Question 20 of 25 |
The weighted average cost of capital is generally used as the discount rate in a bond-refunding decision.
[removed] A. True[removed] B. False
[removed] D.all of these. |
Question 22 of 25 |
Which of the following is not a form of yield on a bond?
[removed] A.coupon rate (nominal yield) |
[removed] B.current yield |
[removed] C.dividend yield |
[removed] D.yield to maturity |
Question 23 of 25 |
There are a number of possible advantages to a rights offering:
[removed] A.current shareholders are protected against dilution. |
[removed] B.the firm has a built-in market of knowledgeable investors. |
[removed] C.distribution costs are lower than a public offering. |
Question 24 of 25 |
The yield to maturity is the internal rate of return on a bond.
[removed] A. True[removed] B. False
Question 25 of 254.0 Points
When a company defaults on a secured debt, it is rare for the secured asset to be sold and the proceeds distributed to the debtor. [removed] A. True[removed] B. False |