Chapter 10

Question 1

Term bond

Answer 1

Scheduled for maturity on a specific date

Question 2

Secured bond

Answer 2

Pledges specific assets of issuer as collateral

Question 3

Debenture

Answer 3

Is unsecured ;backed only by the issuers credit standing

Question 4

Convertible bond

Answer 4

Can be exchanged for stock

Question 5

Premium on bond

Answer 5

Bond price exceeds par value

Question 6

Bearer bond

Answer 6

Unregistered

Question 7

Callable bond

Answer 7

Issuer may retire it at stated $ amount before maturity

Question 8

Registered bond

Answer 8

Records and tracks bond holders name

Question 9

Advantages of bond financing

Answer 9

Does not affect owner control
Interest is tax deductible
Increase return quality

Question 10

Disadvantages of bond financing

Answer 10

Requires payment on both periodic interest and par value at maturity
Can decrease return on equity

Question 11

Interest payment for bonds equation

Answer 11

Bond par value X contract interest rate x time

Question 12

Debt-to-equity ratio

Answer 12

Total liabilities / total equity