Exam 15: Debt Financing

A company issues a callable (at par) 20-year, 5% coupon bond with annual coupon payments. The bond can be called at par in one year after release or any time after that on a coupon payment date. On release, it has a price of $102 per $100 of face value. What is the yield to maturity of this bond when it is released?

A company issues a callable (at par) ten-year, 6% coupon bond with annual coupon payments. The bond can be called at par in one year after release or any time after that on a coupon payment date. On release, it has a price of $104 per $100 of face value. What is the yield to worst of this bond when it is released?

A callable bond will typically have a ________ yield than an otherwise identical bond without a call feature because ________.

A firm issues the convertible debt shown above. The price of stock in this company on July 1, 2008 is $27.24. What is the minimum conversion ratio that would make a bondholder prefer to convert rather than accept the call price?

What is yield to call?

Eurobonds issued in the United Kingdom could NOT be issued in which of the following denominations?

Which of the following is NOT an advantage of private debt over public debt?

What are callable bonds?

Which of the following terms best describes a loan where a larger line of credit or lower interest rate has been obtained by providing collateral to back that loan?

Which of the following statements is FALSE?

A company issues a callable (at par) ten-year, 6% coupon bond with annual coupon payments. The bond can be called at par in one year after release or any time after that on a coupon payment date. On release, it has a price of $104 per $100 of face value. What is the yield to call of this bond when it is released?

Kruller A.G. issues a bond that is offered for sale simultaneously in Europe, the United States, and Japan. Which of the following best describes this bond?

What is a bond's seniority?

Which of the following statements regarding the private debt market is FALSE?

What are notes?

If a bond covenant is not met, then the bond goes into technical default and the bondholder can demand immediate repayment or force the company to renegotiate the terms of the bond.

Supreme Industries issues the following announcement to holders of an issue of callable, convertible notes: "Prior to the close of business on May 17, 2008, holders may convert their Notes into shares of Supreme Industries common stock at 33.25 shares of Supreme Industries common stock per $1,000 principal amount of the Notes. Cash will be paid in lieu of fractional shares. On April 16, 2008, the last reported sale price of Supreme Industries common stock on the NYSE was $21.60 per share." If on May 17, Supreme Industries is trading as $24.60, what is the value of common stock a holder of a $1,000 note would receive?

Which of the following statements concerning the use of sinking funds to repurchase a bond issue is NOT true?

A company issues a callable (at par) 20-year, 5% coupon bond with annual coupon payments. The bond can be called at par in one year after release or any time after that on a coupon payment date. On release, it has a price of $102 per $100 of face value. What is the yield to call of this bond when it is released?

By definition, a preferred stock is a form of debt security.