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5. An advantage of bond financing is: A. Bonds do not affect owners' control. C. Bonds can increase return on equity. E. All correct. B.

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5. An advantage of bond financing is: A. Bonds do not affect owners' control. C. Bonds can increase return on equity. E. All correct. B. Interest on bonds is tax deductible. D. It allows firms to trade on the equity. B. The contract rate is equal to the market rate. 6. When a bond sells at a premium: A. The contract rate is above the market rate. C. The contract rate is below the market rate. D. It means that the bond is a zero-coupon bond. E. The bond pays no interest. B. Contract rate is equal to the market rate. 7. A bond sells at a discount when the: A. Contract rate is above the market rate. C. Contract rate is below the market rate. D. Bond has a short-term life. E. Bond pays interest only once a year. 8. Hornet Corporation has a loan agreement that provides it with cash today, and the company must pay $25,000 one year from today, $15,000 two years from today, and $5,000 three years from today. Hornet agrees to pay 10% interest. The following are factors from a present value table: Periods Interest rate 10% 0.9091 0.8264 0.7513 What is the amount of cash that Hornet receives today? Period Payment PV factor PV of Payment

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