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FINC400 quiz 7




Question;FINC400 quiz 7;Question 1 of 25;4.0 Points;A bond's rating can;depend on all of the following except;A.the;corporation's debt-equity ratio.;B.the;corporation's size.;C.the;ability of the firm to make interest payments.;D.the;coupon rate on the bond.;Question 2 of 25;4.0 Points;The effect of a rights;offering on a stockholder is;;increase his/her wealth.;;increase his/her wealth only if the new stock is purchased.;;decrease his/her wealth unless the stock is purchased.;;decrease his/her wealth if nothing is done.;Question 3 of 25;4.0 Points;Preferred stock;dividends are a deductible expense for a corporation.;A.;True;B.;False;Question 4 of 25;4.0 Points;The costs of bond;refunding are the call premium, and the underwriting costs on the old and new;bond issue.;A.;True;B.;False;Question 5 of 25;4.0 Points;A "subordinated;debenture;A.must;be transferred with the bond to which it is attached.;;used mainly by railroad companies and usually specifies equipment as;collateral.;C.entitles;the bondholder to purchase shares of common stock at a specific price.;;an unsecured bond with an inferior claim on assets in the event of;liquidation.;Question 6 of 25;4.0 Points;Stockholders always have;preemptive rights when new issues of stock are offered.;A.;True;B.;False;Question 7 of 25;4.0 Points;Debentures are commonly;issued by small companies.;A.;True;B.;False;Question 8 of 25;4.0 Points;The subscription rate is;generally _______ than the rights-on price and _______ than the ex-rights;price.;A.higher;higher;B.higher;lower;C.lower;higher;D.lower;lower;Question 9 of 25;4.0 Points;Bondholders never have;any control over the actions of a firm.;A.;True;B.;False;Question 10 of 25;4.0 Points;The increasing;sophistication of individual investors has decreased the role of institutional;investors in the stock market.;A.;True;B.;False;Question 11 of 25;4.0 Points;Stock purchased through;a rights offering may carry lower margin requirements.;A.;True;B.;False;Question 12 of 25;4.0 Points;The term debenture;refers to;A.long-term;secured debt.;B.long-term;unsecured debt.;C.the;after-acquired property clause.;D.a;100-page document covering the specific terms of the offering.;Question 13 of 25;4.0 Points;The difference between;the initial bond price and the maturity value is amortized for tax purposes;over the life of a zero-coupon bond.;A.;True;B.;False;Question 14 of 25;4.0 Points;With regard to interest;rates and bond prices it can be said that;A.a;1% change in interest rates will cause a greater change in long-term bond;prices than short-term prices.;B.a;1% change in interest rates will cause a greater change in short-term bond;prices than long-term prices.;C.long-term;rates are more volatile than short-term rates.;D.a;decrease in interest rates will cause bond prices to fall.;Question 15 of 25;4.0 Points;An increasing proportion;of shares in the U.S. are owned by;A.individual;investors.;B.corporations;(Treasury Stock).;C.institutions.;D.governments.;Question 16 of 25;4.0;Points;Under normal operating;conditions, the board of directors is elected by;A.the;common stockholders.;B.the;preferred stockholders.;C.the;bondholders.;D.two;of the above.;Question 17 of 25;4.0 Points;If a corporate charter;includes a provision for preemptive rights, the stockholders;A.must;sell their stock to the company.;B.get;first option to buy additional issues of common stock.;C.may;purchase existing treasury stock.;D.cannot;utilize cumulative voting procedures.;Question 18 of 25;4.0;Points;The higher the bond rating;A.the;higher the interest rate on a bond.;B.the;lower the interest rate on a bond.;C.the;higher the call premium.;D.the lower the call premium;Question 19 of 25;4.0 Points;The purpose of;cumulative voting is;;maintain majority control of the board of directors.;;allow minority stockholders the possibility of a voice on the board of;directors.;;obstruct unfriendly mergers and takeover efforts.;;prevent the dilution of common stock through pre-emptive rights offerings.;Question 20 of 25;4.0 Points;The weighted average;cost of capital is generally used as the discount rate in a bond-refunding;decision.;A.;True;B.;False;Question 21 of 25;4.0;Points;Preferred stock is the;least used of all long-term securities because;A.investors;can get higher returns after taxes in other investments.;B.preferred;dividends are considered regular (fixed) obligations but are not;tax-deductible.;C.flotation;costs are extremely high compared to bonds.;D.all;of these.;Question 22 of 25;4.0 Points;Which of the following;is not a form of yield on a bond?;;rate (nominal yield);B.current;yield;C.dividend;yield;D.yield;to maturity;Question 23 of 25;4.0 Points;There are a number of;possible advantages to a rights offering;A.current;shareholders are protected against dilution.;B.the;firm has a built-in market of knowledgeable investors.;C.distribution;costs are lower than a public offering.;D.all;of these.;Question 24 of 25;4.0 Points;The yield to maturity is;the internal rate of return on a bond.;A.;True;B.;False;Question 25 of 25;4.0;Points;When a company;defaults on a secured debt, it is rare for the secured asset to be sold and;the proceeds distributed to the debtor.;A.;True;B.;False


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