general business data bank

39. Each
of the following is correct regarding bonds except
they are
a. a
form of interest-bearing notes payable.
b. attractive
to many investors.
c. issued
by corporations and governmental agencies.
d. sold in large denominations.

40. From the standpoint of the issuing company,
a disadvantage of using bonds as a means of long-term financing is that
a. bond interest is deductible for tax purposes.
b. interest must be paid on a periodic basis regardless
of earnings.
c. income to stockholders may increase as a
result of trading on the equity.
d. the bondholders do not have voting rights.

41. If a corporation issued $3,000,000 in bonds
which pay 10% annual interest, what is the annual net cash cost of this
borrowing if the income tax rate is 30%?
a. $3,000,000
b. $90,000
c. $300,000
d. $210,000

42. Secured bonds are bonds that
a. are in the possession of a bank.
b. are registered in the name of the owner.
c. have specific assets of the issuer pledged as
collateral.
d. have detachable interest coupons.

43. A legal document which summarizes the
rights and privileges of bondholders as well as the obligations and commitments
of the issuing company is called
a. a bond indenture.
b. a bond debenture.
c. trading on the equity.
d. a term bond.

44. Stockholders of a company may be reluctant
to finance expansion through issuing more equity because
a. leveraging with debt is always a better idea.
b. their earnings per share may decrease.
c. the price of the stock will automatically
decrease.
d. dividends must be paid on a periodic basis.

45. Which of the following is not an advantage of issuing bonds
instead of common stock?
a. Stockholder control is not affected.
b. Earnings per share on common stock may be
lower.
c. Income to common shareholders may increase.
d. Tax savings result.

46. Bonds that are secured by real estate are
termed
a. mortgage bonds.
b. serial bonds.
c. debentures.
d. bearer bonds.

47. Bonds that mature at a single specified future
date are called
a. coupon bonds.
b. term bonds.
c. serial bonds.
d. debentures.

48. Bonds that may be exchanged for common
stock at the option of the bondholders are called
a. options.
b. stock bonds.
c. convertible bonds.
d. callable bonds.

49. Bonds that are subject to retirement at a
stated dollar amount prior to maturity at the option of the issuer are called
a. callable bonds.
b. early retirement bonds.
c. options.
d. debentures.

50. Investors who receive checks in their names
for interest paid on bonds must hold
a. registered bonds.
b. coupon bonds.
c. bearer bonds.
d. direct bonds.

51. A bondholder that sends in a coupon to
receive interest payments must have a(n)
a. unsecured bond.
b. bearer bond.
c. mortgage bond.
d. serial bond.

52. Bonds that are not registered are
a. bearer bonds.
b. debentures.
c. registered bonds.
d. transportable bonds.

53. Bonds that are issued in the name of the
owner are
a. coupon bonds.
b. bearer bonds.
c. serial bonds.
d. registered bonds.

54. Corporations are granted the power to issue
bonds through
a. tax laws.
b. state laws.
c. federal security laws.
d. bond debentures.

55. The party who has the right to exercise a
call option on bonds is the
a. investment banker.
b. bondholder.
c. bearer.
d. issuer.

,
56. A major
disadvantage resulting from the use of bonds is that
a. earnings
per share may be lowered.
b. interest
must be paid on a periodic basis.
c. bondholders
have voting rights.
d. taxes may increase.

57. Bonds will always fall into all but which
one of the following categories?
a. Callable or convertible
b. Term or serial
c. Registered or bearer
d. Secured or unsecured

58. Which of the following statements
concerning bonds is not a true
statement?
a. Bonds are generally sold through an investment
company.
b. The bond indenture is prepared after the
bonds are printed.
c. The bond indenture and bond certificate are
separate documents.
d. The trustee keeps records of each bondholder.

59. A bond trustee does not
a. issue the bonds.
b. keep a record of each bondholder.
c. hold conditional title to pledged property.
d. maintain custody of unsold bonds.

60. The contractual interest rate is always
stated as a(n)
a. monthly rate.
b. daily rate.
c. semiannual rate.
d. annual rate.