Question 19

When a company prepares a bond indenture, certain provisions of the bonds are included. Which of the following is/are not specified in the indenture?

		Dates of each interest payment.
		The stated interest rate.
		The maturity date.
		The market rate of interest.

7 points

Question 20

Which of the following is not a reason that a corporation would want to issue bonds instead of stock?

		Interest payments can be deducted for income tax purposes.
		Stockholders maintain control.
		The impact on earnings may be positive.
		There is less risk associated with a bond issue.

7 points

Question 21

The annual interest rate specified within a bond indenture is called which of the following?

		The stated rate of interest.
		The market rate of interest.
		The effective rate of interest.
		The actual rate of interest.

7 points

Question 22

Gammell Company issued $50,000 of 9% bonds with annual interest payments. The bonds mature in ten years. The bonds were issued at $48,000. Gammel Company uses the straight-line method of amortization. How much is the annual interest expense?

		$4,700
		$4,300
		$4,500
		$4,680

7 points

Question 23

If a bond is issued at 101, the stated rate of interest was

		higher than the market rate of interest.
		lower than the market rate of interest.
		equal to the market rate of interest.
		not related to the market rate of interest.