Which of the following is FALSE about debt? A) Private debts include bank loans and private placements. B) Corporate bond issuance is similar to equity issuance, both requiring hiring underwriter(s). C) A company cannot issue corporate bonds unless it becomes public listed on a stock exchange first. D) A loan to a firm can be syndicated by multiple banks.

Which of the following is FALSE about debt? A) Private debts include bank loans and private placements. B) Corporate bond issuance is similar to equity issuance, both requiring hiring underwriter(s). C) A company cannot issue corporate bonds unless it becomes public listed on a stock exchange first. D) A loan to a firm can be syndicated by multiple banks.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter9: Long-term Liabilities

Section: Chapter Questions

Problem 16MCQ

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Which of the following statements is NOT true? About half of all corporate debt is sold through the private placement market. Private placement occurs when a firm sells unregistered securities directly to investors such as insurance companies, commercial banks, or wealthy individuals. Investment banks and money center banks often assist firms with private placements. In private placements, there are no restrictions on the resale of the securities.
Which of the following statements regarding the private debt market is FALSE? A) Private debt has the advantage that it avoids the cost of registration. B) Bank loans are an example of private debt—debt that is not publicly traded. C) Private debt has the disadvantage of being illiquid. D) The public debt market is larger than the private debt market.
Which of the following statements is NOT true? A. Debt contracts tend to impose more restrictions on the actions of the borrower than the lender B. Larger corporations have easier access to the securities market C. The financial sector is one of the least regulated industries in the US economy D. Collateral is used to secure debt contracts
when are corporations likely they called the Bonds? A. When the market interest rate is higher than the contract rate, b. When the contract rate is higher than the market rate. C. When their bonds at selling at par with market d. When standard and poor are bullish about treasury bills E. None of the above
Can you answer the question in the picture, please?
Which of the following statements are true about unsecured bonds?I. Income bonds require interest payments only if earned and non-payment of interest does not lead to bankruptcy. Usually issued during the reorganization of a firm facing financial difficulties. II. Debentures are unsecured long-term debt and backed only by the reputation and financial stability of the corporation. Because of this, the earning ability of the issuing corporation is of great concern to the bondholder.III. Claims of bondholders of subordinated debentures are honored only after the claims of secured debt and unsubordinated debentures have been satisfied. IV. Income bonds have longer maturity and unpaid interest is allowed to accumulate for some period of time and must be paid prior to the payment of any dividends to stockholders.
1. An advantage to a corporation of issuing bonds rather than issuing stock or borrowing from a bank include(s) a. All of the below are true b. Interest on bonds is tax deductible, but dividends are notc. Bondholders have no voting rights or ownership of the corporationd. Bank lenders often demand a huge amount of annual information and place onerous restrictions on the business
24. Financial institutions that cut back on their lending are engaged in A) liability management B) deleveraging C) financial innovation. D) torsion control 25. Instruments which provide payments to holders of bonds in the event of default are known as A) collateralized bond obligations B) tertiary payment devices C) credit default swaps D) mortgage-backed securities
Provide an explanation of whether it is advantageous for a bank to classify debt investments as “held to maturity “or “available for sale” if the required return by the market declines? What impact will this have on the bank's balance sheet and net income?
Investment Banks operate and earn profits by: a) Purchasing undervalued securities on the market b) Creating and marketing new financial securities for issuers. c) Underwriting existing security issues, and selling them at a discount. d) Issuing stocks and bonds based on their own credit. e) Purchasing and reselling existing undervalued stocks and bonds. f) None of the other answers.
Identify the following as either an advantage or a disadvantage of bond financing for a company. a. Bonds do not affect owner control. b. A company earns a lower return with borrowed funds than it pays in interest. c. A company earns a higher return with borrowed funds than it pays in interest. d. Bonds require payment of periodic interest. e. Interest on bonds is tax deductible. f. Bonds require payment of par value at maturity.
You are working for a mid-sized company that is looking to estimate its cost of debt. The company has never had an issuance in the bond market. What would be the best proxy to estimate its cost of debt? A. Cost of its bank debt B. Cost of its equity C. Cost of debt from companies of a similar market capitalization D. Cost of debt in the corporate bond market