Which of the following statements concerning corporate bond ratings is TRUE?
A.Bond ratings are typically paid for by a company's bondholders.
B.Bond ratings are based solely on information acquired from sources other than the bond issuer.
C.Bond ratings represent an independent assessment of the credit-worthiness of bonds.
D.None of the given options
When corporations borrow capital from investors through the issuance of bonds, they contractually promise to fulfill which of the following obligations? I. Make regular scheduled interest payments II. Give the right of voting to bondholders III. Repay the original amount borrowed (principal) at maturity IV. Give an ownership interest in the firm
A.I and II
B.I and III
C.II and IV
D.I, III, and IV
Which of the following statements is TRUE regarding corporate debt?
A.Debt is an ownership interest in the firm.
B.Unpaid debt can result in bankruptcy or financial failure.
C.Debt provides the voting rights to the bondholders.
D.Corporation's payment of interest on debt is fully taxable.
When a corporation wishes to borrow money from the general public on a long-term basis, it does so by issuing or selling:
A.Debt securities or bonds
B.Common Stocks
C.Preferred Stock
D.All of the given options
The principal amount of a bond that is repaid at the end of the loan term (at maturity) is called its:
A.Par value
B.Coupon value
C.Present value of an annuity
D.Present value of a lump sum
When corporations borrow capital from investors through issuing debt, they contractually promise to: I. Make regular scheduled interest payments II. Give voting rights to bondholders III. Repay the original principal amount borrowed at maturity IV. Grant equity ownership interest in the firm
A.I and III only
B.II and IV only
C.I, II, and III only
D.I, III, and IV only
A financial bond fundamentally represents a _______________ made by an investor to the ________________.
A.loan; receiver
B.dividend; issuer
C.dividend; receiver
D.loan; issuer
A company issues bonds with a Rs. 1,000 face value. What is the coupon rate if the semi-annual coupon payments of Rs. 45 are paid every 6 months?
A.3 percent
B.6 percent
C.9 percent
D.12 percent
When corporations borrow capital by issuing debt securities, they generally promise to fulfill which of the following contractual obligations? I. Make regular scheduled interest payments II. Give the right of voting to bondholders III. Repay the original amount borrowed (principal) IV. Give an ownership interest in the firm
A.I and II
B.I and III
C.II and IV
D.I, III, and IV
Which of the following statements is FALSE regarding corporate debt financing?
A.Debt is not an ownership interest in the firm.
B.Unpaid debt can result in bankruptcy or financial failure.
C.Debt provides the voting rights to the bondholders.
D.Corporations payment of interest on debt is fully tax deductible.
