Fin 370

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Exam2 FIN370 Fall 2011 Key Version B

1. A call provision in a bond agreement grants the issuer the right to:
A. repurchase the bonds prior to maturity at a pre-specified price.
B. change the coupon rate provided the bondholders are notified in advance.
C. replace the bonds with equity securities.
D. buy back the bonds on the open market prior to maturity.
E. call the bondholder to determine if he or she would like to extend the term of the bond agreement.

BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE
LEARNING OBJECTIVE NUMBER: 1
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 006 #13
SECTION: 6.2
TOPIC: CALL PROVISION
TYPE: DEFINITIONS

2. An 8 percent semiannual coupon bond is priced at $1,204.60. The bond has a
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BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE
LEARNING OBJECTIVE NUMBER: 1
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 002 #28
SECTION: 2.1
TOPIC: BOOK AND MARKET VALUES
TYPE: CONCEPTS

9. What is the goal of financial management for a sole proprietorship?
A. maximize net income given the resources of the firm
B. minimize the reliance on fixed costs
C. minimize the tax impact on the proprietor
D. maximize the market value of the equity
E. decrease long-term debt to reduce the risk to the owner

BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION
LEARNING OBJECTIVE NUMBER: 2
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 001 #39
SECTION: 1.4
TOPIC: GOAL OF FINANCIAL MANAGEMENT
TYPE: CONCEPTS

10. A bond that pays no interest payments and sells at a deep discount is called a(n) _____ bond.
A. convertible
B. callable
C. tax-free
D. zero coupon
E. income

BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE
LEARNING OBJECTIVE NUMBER: 1
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 006 #18
SECTION: 6.4
TOPIC: ZERO COUPON BOND
TYPE: DEFINITIONS

11. In a general partnership, each partner is personally liable for:
A. the debts of the partnership up to the amount he or she invested in the firm.
B. the total debts of the partnership, even if he or she was unaware of those debts.
C. all personal and partnership debts incurred by any partner, even if he or she was unaware of those debts.
D. his or
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