7.

Hultz Corporation obtained a $8,000 loan from a bank on April 1. If the bank charges 6 percent interest annually, how much interest will be owed at December 31?

Select one:

a. $480

b. $400

c. $320

d. $360

8.

Patter & Company issued $4,000,000 of 8%, 10-year bonds at par on July 1. The bonds pay interest semiannually. How much cash did the company receive upon issuance?

Select one:

A. $4,140,000

B. $4,000,000

C. $4,500,000

D. More information is needed to calculate the cash received

9.

On April 1, New Hampshire Co. issued $4,250,000 in 4%, 15-year bonds payable when the market interest rate on similar risk-rated bonds was 5%. The bonds pay interest on April 1 and October 1. What were the proceeds from the bond issue?

Select one:

A. $4,250,000

B. Greater than $4,250,000

C. Less than $4,250,000

D. Not enough information to determine

10.

Which statement is true as it relates to convertible bonds?

Select one:

A. The bonds are considered 'junior' to the claims of secured creditors.

B. The bond investor has the right to exchange the bonds for stock.

C. The bond investor can request that the bonds be repaid prior to the maturity date.

D. The issuing company can pay off the bonds before maturity.

11.

Which one of the following 15-year bonds with a maturity value of $3,000,000 would generate the lowest proceeds upon issuance?

Select one:

A. A bond with a coupon interest rate of 8% and a prevailing market rate of 8%

B. A bond with a coupon interest rate of 7% and a prevailing market rate of 9%

C. A bond with a coupon interest rate of 9% and a prevailing market rate of 7%

D. A bond with a coupon interest rate of 6% and a prevailing market rate of 6%

12.

Collins Co. issued $200,000 of 10 year zero-coupon bonds. After five years, the book value of the bonds was $178,000. Collins Co. decided that it no longer needed the debt, and consequently, decided to retire the bonds early at a cost of $170,000.

What effect does the early retirement have on the companys net income?

Select one:

a. Loss on early retirement of $16,000

b. Gain on early retirement of $8,000

c. No effect

d. Gain on early retirement of $30,000