Question 1 (1 point)

From the standpoint of the issuing company, a disadvantage of using bonds as a means of long-term financing is that

Question 1 options:

	bond interest is deductible for tax purposes.
	interest must be paid on a periodic basis regardless of earnings.
	income to shareholders may increase as a result of trading on the equity.
	the bondholders do not have voting rights.

Question 2 (1 point)

The current market value of a bond is equal to the present value of all future cash flows promised by the bond. These cash flows are

Question 2 options:

	the face value and the interest payments.
	the par value and the face value.
	the interest payments and the coupon payments.
	the par value and the maturity value.

Question 3 (1 point)

The present value of a bond is also known as its

Question 3 options:

	future value.
	deferred value.
	face value.
	market price.

Question 4 (1 point)

The market rate of interest is often called the

Question 4 options:

	stated rate.
	contractual rate.
	effective rate.
	coupon rate.

Question 5 (1 point)

If the market rate of interest is less than the contractual rate of interest, bonds will sell

Question 5 options:

	at face value.
	at a discount.
	at a premium.
	at fair market value.

Question 6 (1 point)

The present value of a $10,000, 5-year bond will be less than $10,000 if the

Question 6 options:

	contractual rate of interest is less than the market rate of interest.
	contractual rate of interest is greater than the market rate of interest.
	bond is convertible.
	contractual rate of interest is equal to the market rate of interest.

Question 7 (1 point)

A $1,000 face value bond with a quoted price of 97 is selling for

Question 7 options:

	$1,000.
	$1,970.
	$970.
	$97.

Question 8 (1 point)

When using the effective-interest method for a bond that is sold at a discount, the amount of interest expense will

Question 8 options:

	remain the same throughout the life of the bond.
	increase as the bond nears maturity.
	decrease as the bond nears maturity.
	equal to the interest paid.

Question 9 (1 point)

Instalment notes with fixed principal payments are repayable in

Question 9 options:

	equal periodic payments made up of principal and interest.
	equal periodic payments of principal.
	equal periodic payments of principal, plus interest.
	equal periodic payments of principal, less interest.

Question 10 (1 point)

A company has total assets of $950,000 and total shareholders' equity of $450,000. The Debt to Total Assets ratio is

Question 10 options:

	52.6%.
	211%.
	47.3%.
	9%.