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7. An indenture is A. the section of a corporation's bylaws pertaining to bond issues B. the summary of the essential features of a stock issue. C. the contract between a coronation and a trustee acting for bo D. the underwriting contract. oration and a trustee acting for bondholders. 8. Capital budgeting is primarily concerned with A. capital formation in the economy. B. evaluating investment alternatives. C. planning future financing needs. D. minimizing the cost of capital 9. The market stabilization function usually A. is performed by the issuing company. B. provides price support for the stock during the distribution period. C. lasts six to nine months. D. is illegal. 10. Which of the following best represents the hierarchy of creditor and stockholder claims A. Senior secured debt, subordinated debentures, common stock B. Common stock, senior secured debt, subordinated debentures C. Senior debentures, subordinated debentures, junior secured debt D. Preferred stock, secured debt, debentures 11. A call provision, which allows the corporation to force an early maturity on a bond issue, usuall contains all but which of the following characteristics? A. Most bonds must be outstanding at least five years before being called. B. After the call date, the call premium tends to decline over time. C. The provision typically calls for debt conversion into common stock. D. The corporation will pay a premium over par for the bonds. 12. Which of the following does a bond's rating NOT depend on? A. The corporation's debt-to-equity ratio B. The corporation's size C. The ability of the firm to make interest payments D. The coupon rate on the bond 13. Which of the following is not a financial advantage to companies using debt? A. Debt is paid back in "cheaper" dollars during inflationary periods. B. Bond holders have no control over the actions of management. C. The cost of debt can lower the weighted overall cost of capital. D. Interest payments are tax deductible