Q&A 4/3

B. False Note: Holder should be borrower or the company.

A callable bond allows the holder to repay the bonds before their scheduled maturity date at a specified call price. A. True B. False

B. False Note: Borrower should be bondholder or investor.

Convertible bonds allow the borrower to convert each bond into a specified number of shares of common stock. A. True B. False

D. Funds are obtained without surrendering ownership control, as well as, interest expense is tax-deductible.

The advantages of obtaining long-term funds by issuing bonds, rather than issuing additional common stock, include which of the following? A. Funds are obtained without surrendering ownership control. B. Interest expense is tax-deductible. C. The company's default risk decreases. D. Funds are obtained without surrendering ownership control, as well as, interest expense is tax-deductible.

D. Stated rate (face, coupon or nominal rates)

The rate quoted in the bond contract used to calculate the cash payments for interest is called the: A. Effective rate B. Yield rate C. Market rate D. Stated rate (face, coupon, or nominal rates)

B. Debenture bonds.

The term used for bonds that are unsecured as to principal is: A. Series bond B. Debenture bonds C. Indenture bonds D. Callable bonds

B. False Note: Need to present value using the market interest rate.

We can calculate the issue price of a bond as the face amount plus the total periodic interest payments. A. True B. False

A. Matures on a single date.

Which of the following definitions describes a term bond? A. Matures on a single date. B. Secured on a single date. B. Secured only by the "full faith and credit" of the issuing corporation. C. Matures in installments. D. Supported by specific assets pledged as collateral by the issuer.