Bus 170, Bonds Intro – Set 1 Name:
i
. If a firm raises capital by selling new bonds, it could be called the “issuing firm,” and the coupon
rate is generally set equal to the required rate on bonds of equal risk.
a. True
b. False
ii
. A call provision gives bondholders the right to demand, or “call for,” repayment of a bond.
Typically, companies call bonds if interest rates decline and do not call them if interest rates rise.
a. True
b. False
iii
. The coupon rate for a bond is always the same as the interest rate for that bond.
a. True
b. False
iv
. As a general rule, corporate bonds have higher required interest rates than United States
government bonds.
a. True
b. False
v
. Morin Company’s bonds mature in 8 years, have a par value of $1,000, and make an annual
coupon interest payment of $65. The market requires an interest rate of 8.2% on these bonds.
What is the bond’s price?
