121.From the standpoint of the issuing company, a disadvantage of using bonds as a means of long-term financing is that
a.bond interest is deductible for tax purposes.
b.interest must be paid on a periodic basis regardless of earnings.
c.income to shareholders may increase as a result of trading on the equity.
d.the bondholders do not have voting rights.
122.If a corporation issued ¥5,000,000,000 in bonds which pay 10% annual interest, what is the annual net cash cost of this borrowing if the income tax rate is 30%?
a.¥5,000,000,000
b.¥150,000,000
c.¥500,000,000
d.¥350,000,000
123.Secured bonds are bonds that
a.are in the possession of a bank.
b.are registered in the name of the owner.
c.have specific assets of the issuer pledged as collateral.
d.have detachable interest coupons.
124.A legal document which summarizes the rights and privileges of bondholders as well as the obligations and commitments of the issuing company is called
a.a bond indenture.
b.a bond debenture.
c.trading on the equity.
d.a term bond.
125.Shareholders of a company may be reluctant to finance expansion through issuing more equity because
a.leveraging with debt is always a better idea.
b.their earnings per share may decrease.
c.the price of the shares will automatically decrease.
d.dividends must be paid on a periodic basis.
126.Which of the following is
not
an advantage of issuing bonds instead of ordinary shares?
a.Shareholder control is not affected.
b.Earnings per share may be lower.
c.Income to ordinary shareholders may increase.
d.Tax savings result.
127.Bonds that are secured by real estate are termed
a.mortgage bonds.
b.serial bonds.
c.debentures.
d.bearer bonds.
128.Bonds that mature at a single specified future date are called
a.coupon bonds.
b.term bonds.
c.serial bonds.
d.debentures.
129.Bonds that may be exchanged for ordinary shares at the bondholder’s option are called
a.options.
b.stock bonds.
c.convertible bonds.
d.callable bonds.
130.Bonds that are subject to retirement at a stated dollar amount prior to maturity at the option of the issuer are called
a.callable bonds.
b.early retirement bonds.
c.options.
d.debentures.