answer 15 16 17 18 a annual b semiannual c quarterly d month

answer 15 16 17 18

a annual b. semiannual c quarterly d. monthly 14. If a corporation wishes to pay off its bonds gradually over time they will probably establish a a. debenture b. zero coupon bond c. convertible bond d. sinking fund 15. If the required rate of return on a bond is less than the bond\'s coupon interest rate, then the bond is valued at a. par value b. a discount C. a premium d. the coupon payment 16. The higher the required rate of return (or the yield) on a bond theits price. a. higher b. lower 17. The legal document in which the provisions of a corporate bond are spelled out is the a. indenture b. proxy c. negative pledge clause d. debenture

Solution

15) The correct answer is c

Explanation:- If coupon payments are at a rate greater than the required rate of return, then the bondssell at a premium.

16) The correct answer is b

Explanation:- The bonds price and its required rate of return have an inverse relationship. The higher the required rate of return , the lower the prices.

17) The correct answer is a

Explanation:- The indenture is a written agreement between the corporation and the lender detailing the terms of the debt issue.

18) The correct answer is c

Explanation:- The cost of capital is the weighted average cost of equity plus the weighted average cost of preferred capital plus the after tax cost of debt

WACC = w_e r_e + w_p r_p + w_d r_d (1-t_c )