60. Listed below are some provisions that are often contained in bond indentures: 1. Fixed assets may be used as security. 2. The bond may be subordinated to other classes of debt. 3. The bond may be made convertible. 4. The bond may have a sinking fund. 5. The bond may have a call provision. 6. The bond may have restrictive covenants in its indenture. Which of the above provisions, each viewed alone, would tend to reduce the yield to maturity investors would otherwise require on a newly issued bond? a. 1, 2, 3, 4, 5, 6 b. 1, 2, 3, 4, 6 c. 1, 3, 4, 5, 6 d. 1, 3, 4, 6 e. 1, 4, 6

60. Listed below are some provisions that are often contained in bond indentures: 1. Fixed assets may be used as security. 2. The bond may be subordinated to other classes of debt. 3. The bond may be made convertible. 4. The bond may have a sinking fund. 5. The bond may have a call provision. 6. The bond may have restrictive covenants in its indenture. Which of the above provisions, each viewed alone, would tend to reduce the yield to maturity investors would otherwise require on a newly issued bond? a. 1, 2, 3, 4, 5, 6 b. 1, 2, 3, 4, 6 c. 1, 3, 4, 5, 6 d. 1, 3, 4, 6 e. 1, 4, 6

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 2MC: A debenture is ________. A. the interest paid on a bond B. a type of bond that can be sold back to...

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6. Which of the following is true of demand bonds?a. They give the issuer the right to call the bonds at a preestablished price.b. They give the issuer the right to demand that the bondholders purchase additional bonds at a preestablished price.c. They give the bondholder the right to demand repayment prior to maturity.d. They give the bondholder the right of first refusal with respect to any additional bonds sold by the issuer. 7. Demand bonds should be reported as governmental fund liabilitiesa. if the government has not entered into a take-out agreement.b. if prevailing interest rates are higher than the interest rate on the bonds.c. if prevailing interest rates are lower than the interest rate on the bonds.d. if the government, by the time it issues its financial statements, has neither refinanced the bonds nor entered into an agreement to do so.
Which of the following is true regarding a bond? O The issuance must be approved by the board of directors. O The terms are set forth in a legal document called a bond indenture. O The contractual interest rate is also referred to as the stated rate. O All of the answer choices are correct.
Which one of the following statements is correct concerning bond classifications? Select one: a. A mortgage security is a bond issued solely by a home builder. b. A note is a bond which has an original maturity date longer than 10 years. c. A debenture is a long-term bond secured by the fixed assets of a firm. d. A callable bond can be repurchased by the issuer prior to the initial maturity date. e. A subordinated bond receives preferential treatment over all other bonds in a bankruptcy.
Which of the following statements relating to bonds is incorrect? A. A bond’s face value is the amount the issuer must pay to the bondholder at maturity. B. The owner of a registered bond is the person to whom interest payments are mailed. C. A bond will typically sell at a discount when its nominal rate is less than the current market rate of interest. D. A bond is a debt instrument giving the issuer flexibility as to maturity date.
TRUE OR FALSE: The specific provisions of a bond issue are described in a document called a bond indenture.
Which of the following statements concerning bonds is FALSE? A. Bonds can be issued either at par, premium, or discount. B. Bonds interest is tax deductible. C. Bondholders have voting rights. D. Bonds are usually considered to be a long term liability.
How does a secured bond differ from an unsecured bond?
Which of the following is correct? a. The terms, “yield rate”, “ stated rate”, and “market rate” are generally interchangeable when referring to interest on bonds. b. The yield or effective interest rate on a bond is equal to the stated rate if the bond premium or discount is amortized by using the straight-line method. c. Interest revenue and expense related to bonds are always computed using the stated rate of interest. d. If a bond is sold at its face amount, the stated and effective interest rates are the same.
Which of the following bond is the safest? Treasury Bonds Corporate Bonds Savings Bonds
Statement 1: In bonds with warrants, if the quoted price is readily determinable, the amount allocated to the financial liability component is equivalent to the present value of future cashflows discounted at the market rate of interest for similar instruments. Statement 2: When warrants are detachable, it means that the warrants are allowed to be sold separately from the bond while when it is non- detachable, it is the opposite wherein the warrants are not allowed to be sold separately from the bond. Only Statement 1 is true. Only Statement 2 is true. Both statements are true. Both statements are false.