Exam 2: Financial Assets Instruments

Under a term loan the borrower agrees to make a series of amortized payments on specific dates.Although speed and flexibility are two advantages of term loans,such loans typically have high issuance costs.

A junk bond is a high risk,high yield debt instrument typically used to finance a leveraged buyout or a merger,or to provide financing to a company of questionable financial strength.

Which of the following is NOT a source of equity on a firm's balance sheet?

Although common stock represents a riskier investment to an individual than do bonds,in the sense of exposing the firm to the risk of bankruptcy,bonds represent a riskier method of financing to a corporation than does common stock.

Which of the following factors does not influence a firm's long-term financing decisions?

The preemptive right is important to shareholders because it

Which of the following statements is correct?

Eurodebt is the term used to designate

When a corporation's shares are owned by a few individuals who are associated with the firm's management,we say that the firm is "closely held."

A company is planning to raise $1,000,000 to finance a new plant.Which of the following statements is correct?

Assume the securities are all issued by the same firm.From the investor's standpoint,rank the following securities in order of increasing risk (the number of the least risky security is placed first,or to the left,in the answer set). (1)Preferred stock. (2)Income bonds. (3)Convertible preferred stock. (4)Mortgage bonds.

Which of the following statements is correct?

A protective feature on preferred stock that requires preferred dividends previously not paid to be disbursed before any common stock dividends can be paid is called what?

Which of the following statements concerning common stock and the investment banking process is false?

Convertible securities are bonds or preferred stocks that,under specified terms and conditions,can be exchanged for common stock at the option of the holder.

Of the following provisions that might be found in a bond indenture,which would tend to reduce the coupon interest rate on the bond in question?

Companies can issue different classes of common stock.Which of the following statements concerning stock classes is correct?

A call provision gives bondholders the right to demand,or "call for," repayment of a bond.Typically,calls are exercised if interest rates rise,because when rates rise the bondholder can get the principal amount back and reinvest it elsewhere at higher rates.

The interest rate paid on Eurodollar deposits depends on the particular bank's lending rate and on rates of return available on U.S.money market instruments.

T-bills are issued electronically with face values ranging from $1,000 to $5 million and with maturities of 4,13,26,or 52 weeks at the time of issue.