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Monday, December 6, 2010
Chapter 20: Long-Term Debt, Preferred Stock, and Common Stock MCQs
Multiple-Choice Quiz
Chapter 20: Long-Term Debt, Preferred Stock, and Common Stock
Just click on the button next to each answer and you'll get immediate feedback.
1.
A bond issue may be retired by:
calling the bonds if there is a call feature.
converting the bonds (if convertible) into common stock.
making a single-sum payment at final maturity.
all of the above.
2.
Protective covenants are:
to protect employees.
to protect the interests of the company.
to protect shareholders.
to protect bondholders.
3.
Which of the following bonds offer the investor the most protection?
First-mortgage bonds
Debentures
Subordinated debentures
Income bonds
4.
A company refunds its bonds for any of the following reasons
EXCEPT
for:
to eliminate restrictive covenants.
to reduce interest costs.
to show higher reported profits.
to issue new bonds at higher rate of interest.
5.
The call-option value of a callable bond is likely to be high when
interest rates are volatile.
interest rates are low and expected to remain low.
interest rate are high and expected to remain high.
markets are inefficient.
6.
Treasury stock
is:
common stock issued by the U.S. government.
preferred stock issued by the U.S. government.
common stock that has been repurchased and is being held by the issuing company.
a corporation's common stock outstanding.
7.
A
call provision
, a
sinking fund
, and/or
conversion
are used to retire
bonds and preferred stock.
bonds and common stock.
preferred stock and common stock.
only common stock.
8.
Preferred shareholders' claims on assets and income of a firm come
those of creditors
those of common shareholders.
before; and also before
after; but before
after; and also after
equal to; and equal to
9.
Dual classes of
are common in new ventures where promotional
usually goes to the founders.
bonds; bonds
preferred stock; preferred stock
common stock; common stock
warrants; warrants
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