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Chapter 16 - Long-Term Debt and Lease Financing
71. A call feature allows:
72. The "call" provision on some bonds allows
73. Buchanan Corp. is refunding $10 million worth of 10% debt. The new bonds will be
issued for 8%. The corporation's tax rate is 35%. The call premium is 9%. What is the net cost
of the call premium?
Chapter 16 - Long-Term Debt and Lease Financing
74. A conversion feature allows:
75. The dollar interest received divided by the market price of the bond is called the
76. Prices of existing bonds move _________ as market interest rates move ________.
Chapter 16 - Long-Term Debt and Lease Financing
77. Which of the following is not a form of yield on a bond?
78. With regard to interest rates and bond prices it can be said that
79. A bond with a coupon rate of 6.5%, maturing in 10 years at a value of $1,000 and current
market price of $695 will have a current yield of
Chapter 16 - Long-Term Debt and Lease Financing
80. Short-term bond yields are generally ______ than long-term bond yields whereas long-
term bond prices are generally ________ than short-term bond prices.
81. Which company is a leader in rating bonds?
82. The higher the bond rating
Chapter 16 - Long-Term Debt and Lease Financing
83. A bond with a coupon rate of 6.5%, maturing in 10 years at a value of $1,000 and a
current market price of $950, will have a yield to maturity (using the approximation formula)
of
84. Solow Corp. has a bond with annual interest payments of $109 maturing in 10 years at a
value of $1,000 per bond. The current market price is $960. What will the nominal yield be?
Chapter 16 - Long-Term Debt and Lease Financing
85. Allais Company's bond has an $85 annual interest payment that will mature in 10 years at
a value of $1,000. The bond has a current market price of $1140. What is the nominal yield of
the bond?
86. Investors consider which of the following to be the most important measure of bond
returns?
87. A bond's rating can depend on all of the following except
Chapter 16 - Long-Term Debt and Lease Financing
88. Aa2 bond is rated lower than a _____ bond.
89. If investors are pessimistic about the future, the spread between yields on high-grade and
low-grade bonds
90. Bond refunding occurs when
Chapter 16 - Long-Term Debt and Lease Financing
91. The underwriting cost on a new bond issue
92. The higher the tax rate, the ______ the net underwriting cost on the new bond issue.
93. Which of the following represents an inflow in a bond refunding decision?
Chapter 16 - Long-Term Debt and Lease Financing
94. Which of the following does not represent a tax implication in the bond refunding
decision?
95. What discount rate is used in the net present value of the refunding decision?
96. Which of the following is not a characteristic of a zero-coupon bond?
Chapter 16 - Long-Term Debt and Lease Financing
97. From the corporate issuer viewpoint, a zero-coupon bond allows the firm to:
98. Zero-coupon bonds
99. Floating rate bonds
Chapter 16 - Long-Term Debt and Lease Financing
100. Which of the following is an advantage of floating rate bonds to investors?
101. In general, how often are floating rate bonds adjusted to meet the market demands?
102. The Haavelmo Widget Corporation has just signed a 60-month lease on an asset with a
6-year life. The lessor will retain the property at the end of the lease, and the present value of
the minimum lease payments is $470,000. The estimated fair value of the property is
$600,000. Is this an operating lease?
Chapter 16 - Long-Term Debt and Lease Financing
103. Floating rate bonds are most likely to be popular with investors when it is anticipated
that
104. A Eurobond is a
105. Disclosure requirements for a Eurobond are _____ demanding than those of the
Securities and Exchange Commission or other domestic regulatory agencies.
Chapter 16 - Long-Term Debt and Lease Financing
106. The disadvantages of debt to the corporation include all but which of the following?
107. Which of the following is not a financial advantage to companies using debt?
108. Leasing is a popular form of financing because
