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FINA ch.2
| Question | Answer |
|---|---|
| The terms and conditions to which a bond is subject are set forth in its | Indenture. |
| Common equity refers to the sum of which of the following balance sheet accounts? | Common stock and retained earnings OR Common stock, additional paid-in capital, retained earnings |
| An option which gives the holder the right to sell a stock at a specified price at some time in the future is called a(n) | Put Option |
| Pure options are instruments that are | Created by investors outside the firm. Bought and sold primarily by investors and speculators. Of greater importance to investors than to financial managers. |
| Your Aunt Agatha purchased a call option a few months ago. Today is the expiration date, so she must decide whether to exercise the option. Which of the following statements is correct? Do not consider brokers' commissions in your answer. | Aunt Agatha should exercise the option if the price of the stock is greater than the exercise, or strike, price. |
| Eurodebt is the term used to designate | Debt that is denominated in a currency that is different than the currency of the country in which it is sold. |
| The sale of new common stock at a price greater than par value will affect which balance sheet accounts? (Choose the most complete answer.) | Assets, common stock, paid-in capital. |
| Which of the following statements concerning preferred stock is correct? | From the issuer's point of view, preferred stock is less risky than bonds. |
| Which of the following statements is correct? | A floating rate bond has an advantage over a fixed rate bond because its price is more stable and this makes a floating rate preferred bond more suitable as a liquid asset. |
| Which of the following statements is false? | The term Eurobond specifically applies to any foreign bonds denominated in U.S. currency. |
| A(n) ____ is generally obtained from a bank or insurance company and the borrower agrees to make a series of payments consisting of interest and principal. | term loan |
| A(n) ____ is a bond that pays no annual interest but is sold at a discount below par, thus providing compensation to investors in the form of capital appreciation. | zero coupon bond |
| 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? | cumulative dividends |
| Preferred stockholders generally are given the right to vote for directors if | the company has not paid the preferred dividend for a specified period. |
| A ____ is a financial instrument which gives the owner the right but not the obligation to sell shares of stock at a specified price during a particular time period. | put option |
| Which of the following is NOT a source of equity on a firm's balance sheet? | property, plant, and equipment |
| Which of the following is NOT a type of debt | preferred stock |
| A ____ is an agreement to between two firms where one firm agrees to sell some of its financial assets to another and then buy the financial assets back from that firm at a later time | repurchase agreement |
| 19. Which of the following is not an advantage of a term loan over public debt offerings? | significantly lower interest rates |
| The income that an investor earns from municipal bonds is | generally exempt from federal taxes, but most states impose local taxes. |
Created by:
jesse112