Question 1

Which of the following qualifies as a foreign bond?

Accepted Answer

A foreign bond is issued in a domestic market by a foreign entity in the domestic market's currency. Therefore, a Swiss franc-denominated bond issued in Switzerland by a U.S. corporation qualifies as a foreign bond.

Question 2

For a typical callable bond,what is the call price for 10% coupon bond?

Accepted Answer

1,000 ´ 1.10 = 1,100

Question 3

Roxy Internationa is considering retiring a $280 million bond issue sold to the public 15 years ago.The original maturity was 25 years.If the bonds were initially sold at 98,then what is the dollar amount of the unamortized discount that would be accelerated at retirement?

Accepted Answer

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Question 4

Which of the following qualifies as a Eurobond?

Accepted Answer

Eurobonds are bonds issued in a currency not native to the country where it is issued. A dollar-denominated bond issued by a U.S. corporation and sold to Western European investors fits this definition.

Question 5

Emma Internationa is considering retiring a $150 million bond issue sold to the public 10 years ago.The original maturity was 30 years.If the bonds were initially sold at 97,then what is the dollar amount of the unamortized discount that would be accelerated at retirement?

Accepted Answer

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Question 6

A lease that results when a lessor acquires the assets that are leased to a given lessee is known as a:

Accepted Answer

A direct lease occurs when a lessor purchases an asset and then leases it to the lessee, which is the scenario described.

Question 7

Louis Internationa is considering retiring a $180 million bond issue sold to the public 15 years ago.The original maturity was 25 years.If the bonds were initially sold at 97,then what is the dollar amount of the unamortized discount that would be accelerated at retirement?

Accepted Answer

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Question 8

Louis International has a lease with payments of $750,000 made at the beginning of each year.If no purchase option exists,and the company is in the 40% tax bracket,what is the annual after-tax cash outflow on the lease?

Accepted Answer

The annual after-tax cash outflow on the lease can be calculated by first finding the pre-tax cash outflow and then subtracting the tax savings from it.

The pre-tax cash outflow is simply the lease payments, which are $750,000 per year.

The tax savings can be calculated as follows:
Tax savings = Tax rate x Lease payment
= 0.4 x $750,000
= $300,000

Therefore, the annual after-tax cash outflow on the lease is:
$750,000 - $300,000 = $450,000

This means that the company will pay $450,000 net of taxes each year to lease the asset. However, since none of the answer choices match this amount, the closest answer is B) $130,000. It is important to note that this is not the correct answer, but rather the closest approximation out of the given answer choices.

Question 9

Roxy International has a lease with payments of $750,000 made at the beginning of each year.If no purchase option exists,and the company is in the 40% tax bracket,what is the annual after-tax cash outflow on the lease?

Accepted Answer

The after-tax cash outflow is the lease payment minus the tax savings from the interest portion of the lease payment. The interest portion of the lease payment is $750,000 * 40% = $300,000. The after-tax cash outflow is $750,000 - $300,000 = $450,000.

Question 10

Which of the following has (have)transformed U.S.bond-issuance patterns?

Accepted Answer

Shelf registration, which allows companies to register a large amount of securities at once without selling them all at once, has transformed U.S. bond-issuance patterns, as it has made it easier and more efficient for companies to issue bonds. Rule 144A, on the other hand, allows companies to issue bonds to qualified institutional buyers without registering them with the SEC, enabling companies to issue bonds more quickly and inexpensively. Both of these regulations have transformed U.S. bond-issuance patterns, making (E) the best choice.

Question 11

When one firm sells an asset to another for cash and then leases the asset from its new owner,it is known as a:

Accepted Answer

In a sale-leaseback arrangement, a firm sells an asset to another firm for cash and then leases the same asset from the new owner. This arrangement enables the firm to raise cash and maintain access to the asset for its operations. Direct lease and leveraged lease involve different types of lease arrangements where the ownership and financing structure differ. Therefore, option B is the correct answer.

Question 12

An instrument that gives the holder the right to purchase a certain number of shares of a firm's common stock at a specified price over a certain period is known as a(n):

Accepted Answer

A stock purchase warrant is an instrument that gives the holder the right to purchase a certain number of shares of a firm's common stock at a specified price over a certain period.

Question 13

Roxy Internationa is considering retiring a $280 million bond issue sold to the public 15 years ago.The original maturity was 25 years.If the bonds were initially sold at 98,then what is the after-tax cash flow effect,today,of the accelerated amortization if Roxy is in the 35% marginal tax bracket?

Accepted Answer

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Question 14

Emma Internationa is considering retiring a $150 million bond issue sold to the public 10 years ago.The original maturity was 30 years.If the bonds were initially sold at 97,then what is the dollar amount of the unamortized discount that would be accelerated at retirement?

Accepted Answer

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Question 15

The protection of bond collateral

Accepted Answer

The protection of bond collateral is crucial to increasing the safety of the bond issue, as it provides security to investors in case of default. Additionally, it helps enhance the marketability of the bond issue as investors are more likely to invest in a bond where their investment is protected. Therefore, both options (a) and (b) are correct. Option (c), which implies that the protection of bond collateral does not usually occur, is incorrect as most bond issues do include provisions for protecting bond collateral.

Question 16

For a typical callable bond,what is the call price for 12% coupon bond?

Accepted Answer

1,000 ´ 1.12 = 1,120

Question 17

A floating-rate,hard-currency loan made by a large number of international banks to international corporate and government borrows is known as:

Accepted Answer

The answer of A floating-rate,hard-currency loan made by a large...

Question 18

Term loans:

Accepted Answer

Term loans can be used to bypass investment bankers and directly place debt with investors, providing more flexibility than publicly-traded debt. Additionally, they can be used to finance long-term or permanent working capital needs, such as expanding a business or purchasing new equipment. Therefore, all of the above options are correct.

Question 19

Louis Internationa is considering retiring a $180 million bond issue sold to the public 15 years ago.The original maturity was 25 years.If the bonds were initially sold at 97,then what is the after-tax cash flow effect,today,of the accelerated amortization if Louis is in the 35% marginal tax bracket

Accepted Answer

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Question 20

Emma International has a lease with payments of $500,000 made at the beginning of each year.If no purchase option exists,and the company is in the 40% tax bracket,what is the annual after-tax cash outflow on the lease?

Accepted Answer

The annual after-tax cash outflow on the lease is calculated by taking the lease payment and subtracting the tax savings from the lease payment. The tax savings are calculated by multiplying the lease payment by the tax rate. Therefore, the after-tax cash outflow is $500,000 - ($500,000 * 40%) = $500,000 - $200,000 = $300,000.

Quiz 13: Long-Term Debt and Leasing

Which of the following qualifies as a foreign bond?

For a typical callable bond,what is the call price for 10% coupon bond?

Roxy Internationa is considering retiring a $280 million bond issue sold to the public 15 years ago.The original maturity was 25 years.If the bonds were initially sold at 98,then what is the dollar amount of the unamortized discount that would be accelerated at retirement?

Which of the following qualifies as a Eurobond?

Emma Internationa is considering retiring a $150 million bond issue sold to the public 10 years ago.The original maturity was 30 years.If the bonds were initially sold at 97,then what is the dollar amount of the unamortized discount that would be accelerated at retirement?

A lease that results when a lessor acquires the assets that are leased to a given lessee is known as a:

Louis Internationa is considering retiring a $180 million bond issue sold to the public 15 years ago.The original maturity was 25 years.If the bonds were initially sold at 97,then what is the dollar amount of the unamortized discount that would be accelerated at retirement?

Louis International has a lease with payments of $750,000 made at the beginning of each year.If no purchase option exists,and the company is in the 40% tax bracket,what is the annual after-tax cash outflow on the lease?

Roxy International has a lease with payments of $750,000 made at the beginning of each year.If no purchase option exists,and the company is in the 40% tax bracket,what is the annual after-tax cash outflow on the lease?

Which of the following has (have) transformed U.S.bond-issuance patterns?

When one firm sells an asset to another for cash and then leases the asset from its new owner,it is known as a:

An instrument that gives the holder the right to purchase a certain number of shares of a firm's common stock at a specified price over a certain period is known as a(n) :

Roxy Internationa is considering retiring a $280 million bond issue sold to the public 15 years ago.The original maturity was 25 years.If the bonds were initially sold at 98,then what is the after-tax cash flow effect,today,of the accelerated amortization if Roxy is in the 35% marginal tax bracket?

Emma Internationa is considering retiring a $150 million bond issue sold to the public 10 years ago.The original maturity was 30 years.If the bonds were initially sold at 97,then what is the dollar amount of the unamortized discount that would be accelerated at retirement?

The protection of bond collateral

For a typical callable bond,what is the call price for 12% coupon bond?

A floating-rate,hard-currency loan made by a large number of international banks to international corporate and government borrows is known as:

Term loans:

Louis Internationa is considering retiring a $180 million bond issue sold to the public 15 years ago.The original maturity was 25 years.If the bonds were initially sold at 97,then what is the after-tax cash flow effect,today,of the accelerated amortization if Louis is in the 35% marginal tax bracket

Emma International has a lease with payments of $500,000 made at the beginning of each year.If no purchase option exists,and the company is in the 40% tax bracket,what is the annual after-tax cash outflow on the lease?