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1. Initial public offerings (IPO) most likely occur in the: A. Secondary market. B. Initial market. C. Primary market. D. Opportunity market. 2. The yield

1. Initial public offerings (IPO) most likely occur in the:

A. Secondary market.

B. Initial market.

C. Primary market.

D. Opportunity market.

2. The yield to maturity on a bond is:

A

Lower than the coupon rate when the bond sells at a discount, and equal to the coupon rate when the bond sells at a premium.

B

The discount rate that will establish the present value of the payments equal to the current bond price.

C

Based on the assumption that payments received are reinvested at the coupon rate of return.

D

Always equal to the coupon rate when the bond sells at a discount.

3. Disadvantages of issuing bonds most likely includes:

A

Interest paid by the issuing corporation on bonds is a deductible expense for the corporation for federal income tax purposes.

B

Bonds (debt) can increase the return on equity through favorable leverage.

C

Bonds typically require payment of both periodic interest and maturity value.

D

Bonds impact shareholder control.

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