The written agreement between a corporation and its bondholders might contain a prohibition against paying dividends in excess of current earnings. This prohibition is an example of a(n):

a.

affirmative indenture

b.

collateral restriction

c.

restrictive covenant

Dohan Bike has an outstanding perpetual callable bond. The par value of the callable bond is $1,000. The bond makes an annual coupon payment, and the coupon rate is 4%. It can be called in one year. The call price will be $1,300 if it is called. There is a 35% chance that the long-term interest rate in one year will be 5.5% and a 65% chance that the interest rate will be 3.3%. The current interest rate is 4%. Based on the above information, the call premium of the bond is

a.

$300

b.

$40

c.

$55

Crawford Coffee is considering a project with an initial cost of $53,200, and cash flows of $19,600, $22,000, $38,000, and $13,200 for Years 1 to 4, respectively. How many internal rates of return do you expect this project to have?

a.

2

b.

0

c.

1