A vendor offers you trade credit of 2/10, net 45. The value of the discount is the equivalent of ________%.

A firm borrows $10,000 for one year at 12 percent interest. What is the effective rate of interest if the loan is discounted?

A. Less than 12.5 percent

B. More than 12.5 percent, but less than 13.5 percent

C. More than 13.5 percent, but less than 14.5 percent

D. More than 14.5 percent

he longer the time to maturity:

Select one:

A. the greater the price increase from an increase in interest rates.

B. the less the price increase from an increase in interest rates.

C. the greater the price increase from a decrease in interest rates.

D. the less the price decrease from a decrease in interest rates.

a new debt issue will sell at par and have a coupon rate on be 12%. What is the after-tax cost of debt if the firm's tax rate is 34%?

A conversion feature allows:

Select one:

A. the bondholder to redeem the bond before the maturity date.

B. the corporation to redeem the bond before the maturity date.

C. the bondholder to exchange the bond for common stock.

D. the bondholder to demand increased collateral.

Which of the following is not a form of yield on a bond?

Select one:

A. coupon rate (nominal yield)

B. current yield

C. dividend yield

D. yield to maturity

The higher the bond rating

Select one:

A. the higher the interest rate on a bond.

B. the lower the interest rate on a bond.

C. the higher the call premium.

D. the lower the call premium.

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The disadvantages of debt to the corporation include all of the following EXCEPT?

Select one:

A. Debt may have to be paid back with "cheaper" dollars.

B. Interest and principal payments must be met.

C. Indenture agreements may place burdensome restrictions on the firm.

D. Too much debt may depress the firm's stock price.

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Which of the following is NOT true about preferred stock?

Select one:

A. 70% of dividends are nontaxable to other corporations which hold preferred stock.

B. The after-tax cost is higher than debt with the same yield.

C. Dividends are legal obligations of the firm.

D. Preferred stocks are often cumulative in respect to dividends.