Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
12th Edition
ISBN: 9781259144387
Author: Richard A Brealey, Stewart C Myers, Franklin Allen
Publisher: McGraw-Hill Education
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Chapter 14, Problem 3PS
Terminology* Fill in the blanks, using the following terms: floating rate, common stock, convertible, subordinated,
- a. If a lender ranks behind the firm’s general creditors in the event of default, his or her loan is said to be _____.
- b. Interest on many bank loans is based on a ____ of interest.
- c. A(n) _____ bond can be exchanged for shares of the issuing corporation.
- d. A(n) _____ gives its owner the right to buy shares in the issuing company at a predetermined price.
- e. Dividends on _____ cannot be paid unless the firm has also paid any dividends on its _____.
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Students have asked these similar questions
____ occurs when a firm calls a relatively high interest rate issue and replaces it with a lower interest rate issue.
a.
Bond refunding
b.
A call feature
c.
A sinking fund
d.
Indenture refinancing
Which statement is FALSE regarding bonds?Select one:The pay back their face value
within their maturity.They can be traded on secondary markets. Entitles its holder for
cash inflows.When issued they increase the equity of the firm.
Debt Securities -
These securities are in the form of debt or borrowings which have to be repaid by the issuer to the holder of the securities.
The issuers of debt securities have to pay interest in the form of coupons at a rate of interest.
Debt securities are a means of diversification and provide a predictable income stream to the holders.
You mention "coupons" in you debt instrument discussion. Can you tell us more about these coupons? How do they work, where do we find them? Are they registered?
Chapter 14 Solutions
Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
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- The Interest rate on which of the following is the LIBOR? a.Banker's acceptances b.Repurchase agreement c.Certificate of Deposits d.Eurodollar CDarrow_forwardCredit is the normal balance of* Bonds Payable Long Term Loans O Unearned Revenues All the optionsarrow_forwardPlease explain in detailarrow_forward
- Tell whether the following statements describe the characteristics of stocks or bonds. e. Issues of a stake of ownership in a company. f. Investment that generally have higher reward. g. Debt that is made with an investors for cash exchange for interest. h. Investors can earn money if the security increases, but they can lose money if the security decreases. i. The seller agrees to pay interest on the loan at a fixed rate and schedule.arrow_forwardWhich of the following does not impact the calculation ofthe cash interest payments to be made to bondholders?a. Face value of the bond.b. Stated interest rate.c. Market interest rate.d. The length of time between payments.arrow_forwardWhat does the book value of debt and equity refer to? O A. The par values of common stock and the maturity values of debt B. What a willing buyer and a willing seller will exchange the asset for O C. The values at which they are traded in the financial markets D. The values at which debt and equity are carried on a balance sheetarrow_forward
- Select the description that best fits each term or phrase. A. Records and tracks the bondholders’ names. B. Is unsecured; backed only by the issuer’s credit standing. C. Has varying maturity dates for amounts owed. D. The legal contract between the issuer and the bondholders. E. Can be exchanged for shares of the issuer’s stock. F. Is unregistered; interest is paid to whoever possesses them. G. Maintains a separate asset account from which bondholders are paid at maturity. H. Pledges specific assets of the issuer as collateral. 1. Registered bond 5. Convertible bond 2. Serial bond 6. Bond indenture 3. Secured bond 7. Sinking fund bond 4. Bearer bond 8. Debenturearrow_forwardThe Interest rate on which of the following is the LIBOR? a. Bankers' acceptances b. Repurchase agreement c. Certificate of Deposits d. Eurodollar CDarrow_forwardA firm has a choice of taking on bank debt or issuing bonds. Under what conditions will it take on bank debt?arrow_forward
- Serial bonds are a. Bonds backed by collateral.b. Bonds that mature in installments.c. Bonds the issuer can repurchase at a fixed price.d. Bonds issued below the face amount.arrow_forwardA part) The principle repaid at the end of the loan is considered to be A) par value B) face value C) both d) none B part) While the cashflows generated from common stock looks like a perpetual bond, it is not a form of equity True or falsearrow_forwardA bond issue that does NOT trade on the public market but instead is sold to a small group of investors is called a(n): O A. syndicated bond. O B. revolving line of credit. OC. syndicated bank loan. D. Eurobond. O E. prívate placement.arrow_forward
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