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Please answer the following questions:
1. An indenture is best described as:
a. a bond
b. a contract
c. a prospectus
d. a bond rating
2. A legal document that describes the provisions of a bond issue is called:
a. an indenture
b. a debenture
c. a covenant
d. a term-loan agreement
3. A bond rated Baa would be considered to be:
a. speculative
b. junk
c. investment grade
d. in default
4. A secured bond would require:
a. a plan for paying off the bond at maturity
b. no restrictive covenants
c. an independent trustee
d. a claim on specific assets in the event of default
5. A bond issue with staggered maturities would best be described as:
a. a term bond issue
b. a capital appreciation bond issue
c. a serial bond issue
d. a sinking fund bond issue
6. The required periodic payment of principal to ensure payment of the bond by maturity is referred to as:
a. an escrow account
b. a sinking fund
c. a serial bond retirement account
d.a call premium
7. A medium-grade bond according to Moodys has a rating of:
a. Baa
b. B
c. A
d. Aaa
8. A firm is most likely to call an outstanding bond issue when:
a. interest rates rise
b. it needs to raise new funds
c. interest rates fall
d. its cost of capital increases
9. The call price will exceed the par value by an amount called:
a. the call premium
b. the call discount
c. the redemption price
d. the percentage of price
10. Issuing new bonds to replace old bonds is called:
a. a refunding operation
b. a provisional call
c. a serial redemption
d. a sinking fund redemption
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