Moody's and Standard and Poor's are agencies that □ a. advise municipal bond issuers on the tax exempt status of their bonds. b. help investors collect when corporations default on their bonds. O c. produce information about the probability of default on corporate bonds. O d. maintain liquid markets for corporate bonds.

Moody's and Standard and Poor's are agencies that □ a. advise municipal bond issuers on the tax exempt status of their bonds. b. help investors collect when corporations default on their bonds. O c. produce information about the probability of default on corporate bonds. O d. maintain liquid markets for corporate bonds.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 18QTD

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Holdings of government bonds are classified on a bank's balance sheet as Group of answer choices assets, because investing in government bonds represents a use of funds for investment. liabilities, because the bank must borrow in order to be able to invest in the government bonds. assets, because the markets for government bonds are the most liquid in the world. liabilities, because the government bonds must be pledged as collateral against borrowing.
Most bonds: Select the correct response: give bondholders a voice in the affairs of the corporation are interest-bearing obligations of governments or corporations are floating-rate securities are money market securities
The discount rate is the rate that the O Fed charges member banks. Fed charges the Treasury for sales of securities. O Fed charges on government securities. O Treasury pays on savings bonds
STRIPS are: a) Government-backed schemes that allow investors to hedge against market risk. b) Government bonds linked to inflation rates. c) Tax-free saving accounts aimed at increasing retirement income d) Corporate bonds
(c) Jim Thome has prepared the following list of statements about bonds. 1. Bonds are a form of interest-bearing notes payable. 2. When seeking long-term financing, an advantage of issuing bonds over issuing common stock is that stockholder control is not affected. 3. When seeking long-term financing, an advantage of issuing common stock over issuing bonds is that tax savings result. 4. Secured bonds have specific assets of the issuer pledged as collateral for the bonds.
1) A corporation may choose to use debt financing because a) it has an income tax advantage. b) it typically has a higher cost of capital than equity. c) it carries voting rights. d) it reduces financial leverage. 2. The effective rate of interest on bonds a) is the interest rate specified on the bond certificate. b) is the market rate of interest when the bonds are actually sold. c) is the market rate of interest on the date of public announcement. d) none of these choices.
True or False 1. The holder of the bond indenture is receiving interest income on a regular basis. 2. Loan from a bank is interest-bearing. 3. When a corporation raises capital through equity financing, it results to an increase in its equity. 4.
2. Bond A and Bond B have identical characteristics except that Bond A has a higher interest rate. Which bond has a higher credit risk? 3. Bond A and Bond B are identical except Bond B has a longer term. Therefore, we expect Bond _____ to pay a higher rate of interest. 4.Bonds issued by state and local governments are called _____ bonds. Bonds issued by financially shaky corporations are called _____ bonds. Of these two, which type of bond usually pays a relatively higher interest rate?
a. Explain what a corporate bond isb. Outline the characteristics of the bond marketd. Explain the benefits of issuing bonds to raise financing
A financial institution that invests $100 million into corporate bonds is exposed to which of the following risks? a. Credit and interest rate risk. b. Liquidity and technology risk. c. Solvency and technology risk. d. Off-balance sheet and interest rate risk.
1. How would you define corporatebonds? Explain in your own wordswhat Bonds issued at Par, at aDiscount, and at a Premium are.2. How would you explain thedifference between bank loans andissuing corporate bonds? In youropinion, which of the fundingmethods is more attractive to acompany?
(b) Jim Thome has prepared the following list of statements about bonds. 1. Bonds are a form of interest-bearing notes payable. 2. When seeking long-term financing, an advantage of issuing bonds over issuing common stock is that stockholder control is not affected. 3. When seeking long-term financing, an advantage of issuing common stock over issuing bonds is that tax savings result. 4. Secured bonds have specific assets of the issuer pledged as collateral for the bonds. 5. Secured bonds are also known as debenture bonds. 6. Bonds that mature in installments are called term bonds. 7. A conversion feature may be added to bonds to make them more attractive to bond buyers. 8. The rate used to determine the amount of cash interest the borrower pays is called the stated rate. 9. Bond prices are usually quoted as a percentage of the face value of the bond. 10. The present value of a bond is the value at which it should sell in the marketplace. Instructions Identify each statement as true or…