Question 1

Eurobonds issued in France could NOT be issued in which of the following denominations?

Accepted Answer

Eurobonds are typically issued in a currency that is different from the currency of the country where they are issued. Since the euro is the currency of France, Eurobonds issued in France would not be denominated in euros.

Question 2

What kind of corporate debt has a maturity of less than ten years?

Accepted Answer

Notes typically have a maturity of less than ten years, so they are the most likely choice for this type of corporate debt. Asset-backed bonds and mortgage bonds may have longer maturities since they are backed by specific assets, while debentures can have varying maturities depending on the specific terms of the bond.

Question 3

A firm issues $200 million in straight bonds at par and a coupon rate of 7%.The firm pays fees of 2.5% on the face value of the bonds.What is the net amount of funds that the debt issue will provide for the firm?

Accepted Answer

The face value of the bonds is $200 million and the coupon rate is 7%, which means the firm will pay an annual interest of $14 million (7% of $200 million). 
The fees on the face value of the bonds are 2.5%, which means the firm will pay $5 million (2.5% of $200 million) in fees. 
Therefore, the net amount of funds that the debt issue will provide for the firm is:
$200 million (face value of the bonds) - $5 million (fees) = $195 million.

Hence, option C is the correct answer.

Question 4

What is an original issue discount bond?

Accepted Answer

The answer of What is an original issue discount bond?...

Question 5

Which of the following statements is FALSE?

Accepted Answer

For private placements, the prospectus does not have to include an indenture. Private placements are exempt from many of the registration and disclosure requirements of public offerings, and thus the terms of the indenture may not be publicly disclosed.

Question 6

A firm issues $500 million in straight bonds at an original issue discount of 1% and a coupon rate of 5%.The firm pays fees of 3% on the face value of the bonds.What is the net amount of funds that the debt issue will provide for the firm?

Accepted Answer

The answer of A firm issues $500 million in straight...

Question 7

What kind of corporate debt must be secured by real property?

Accepted Answer

Mortgage bonds are a type of corporate debt that is secured by real property, specifically by a mortgage on the property. Notes and debentures are unsecured corporate debt, while asset-backed bonds may be secured by specific assets (such as accounts receivable or inventory) but not necessarily real property.

Question 8

What kind of unsecured corporate debt has a maturity of less than ten years?

Accepted Answer

Notes are typically unsecured short-term debt securities that have a maturity of less than ten years. Mortgage bonds and asset-backed bonds are typically secured by collateral and may have longer maturities. Debentures are a type of unsecured debt, but they can have longer maturities than notes.

Question 9

Which of the following statements is FALSE?

Accepted Answer

Notes typically have shorter maturities than debentures, not longer.

Question 10

Which of the following statements is FALSE?

Accepted Answer

The face value or principal amount of the bond can be denominated in various standard increments, not just $10,000. Some common increments include $1,000, $5,000, and $100,000. Therefore, statement C is false.

Question 11

Bonds issued by a foreign company in a local market,intended for local investors,and denominated in the local currency are known as

Accepted Answer

The answer of Bonds issued by a foreign company in...

Question 12

Bonds issued by a local entity,denominated in the local currency,traded in a local market,but purchased by foreigners are called

Accepted Answer

Domestic bonds are issued by local entities, denominated in the local currency, and traded in a local market. The fact that they are also purchased by foreigners does not change the fact that they are domestic bonds. Yankee bonds are issued by foreign entities in the US market, Eurobonds are denominated in a currency other than that of the country in which they are issued, and foreign bonds are issued by foreign entities in a foreign market.

Question 13

Which of the following statements is FALSE?

Accepted Answer

Eurobonds are international bonds that are issued in a currency that is different from the currency of the country where they are issued. They are not denominated in the local European currency.

Question 14

Which of the following statements regarding the private debt market is FALSE?

Accepted Answer

The public debt market includes government-issued securities and corporate bonds that are publicly traded. The private debt market includes financing from non-bank lenders, such as private equity firms and hedge funds, and is generally smaller than the public debt market. Therefore, statement D is false.

Question 15

Which of the following statements is FALSE?

Accepted Answer

This statement is false. Most debenture issues do not contain clauses restricting the company from issuing new debt with equal or lower priority than existing debt. In fact, subordinated debentures are a form of lower priority debt that a company may issue after issuing other higher priority debt.

Question 16

Tompkinson's PLC. ,a British company,issues a bond in U.S.dollars in the United States which is intended for U.S.investors.Which of the following best describes this bond?

Accepted Answer

A Yankee bond is a bond issued by a foreign entity in the United States, denominated in U.S. dollars and intended for U.S. investors. Therefore, Tompkinson's PLC issuing a bond in U.S. dollars in the United States for U.S. investors is a Yankee bond.

Question 17

What kind of corporate debt can be secured by any specified assets?

Accepted Answer

Asset-backed bonds are secured by specified assets, such as receivables, inventory, or property. Mortgage bonds are specifically secured by real estate, notes can be secured or unsecured, and debentures are unsecured.

Question 18

The face value of bonds are denominated most commonly in which of the following standard increments?

Accepted Answer

The face value of bonds is commonly denominated in increments of $1000, also known as a round lot. This is because institutional investors, who typically buy and sell large quantities of bonds, prefer to trade in larger denominations to make transactions more efficient. While bonds may also be denominated in smaller increments such as $10, $100, or $10,000, these are less common and typically used for retail investors or in special circumstances.

Question 19

Kruller A.G.issues a bond that is offered for sale simultaneously in Europe,the United States,and Japan.Which of the following best describes this bond?

Accepted Answer

A bond that is issued simultaneously in multiple countries is called a global bond. This is different from a foreign bond, which is issued in a single country by a foreign issuer, and a Eurobond, which is issued in a currency other than that of the country where it is issued.

Question 20

A firm issues $500 million in straight bonds at par and a coupon rate of 5%.The firm pays fees of 3% on the face value of the bonds.What is the the net amount of funds that the debt issue will provide for the firm?

Accepted Answer

The net amount of funds that the debt issue will provide for the firm is calculated as follows:
Amount received from bondholders = Face value of bonds * Coupon rate 
= $500 million * 5% 
= $25 million

Fees paid by the firm = Face value of bonds * Fees 
= $500 million * 3% 
= $15 million

Net amount received = Amount received - Fees paid 
= $25 million - $15 million 
= $10 million

Therefore, the net amount of funds that the debt issue will provide for the firm is $485 million (i.e., the face value of bonds minus fees paid).

Quiz 15: Debt Financing

Eurobonds issued in France could NOT be issued in which of the following denominations?

What kind of corporate debt has a maturity of less than ten years?

A firm issues $200 million in straight bonds at par and a coupon rate of 7%.The firm pays fees of 2.5% on the face value of the bonds.What is the net amount of funds that the debt issue will provide for the firm?

What is an original issue discount bond?

Which of the following statements is FALSE?

A firm issues $500 million in straight bonds at an original issue discount of 1% and a coupon rate of 5%.The firm pays fees of 3% on the face value of the bonds.What is the net amount of funds that the debt issue will provide for the firm?

What kind of corporate debt must be secured by real property?

What kind of unsecured corporate debt has a maturity of less than ten years?

Which of the following statements is FALSE?

Which of the following statements is FALSE?

Bonds issued by a foreign company in a local market,intended for local investors,and denominated in the local currency are known as

Bonds issued by a local entity,denominated in the local currency,traded in a local market,but purchased by foreigners are called

Which of the following statements is FALSE?

Which of the following statements regarding the private debt market is FALSE?

Which of the following statements is FALSE?

Tompkinson's PLC. ,a British company,issues a bond in U.S.dollars in the United States which is intended for U.S.investors.Which of the following best describes this bond?

What kind of corporate debt can be secured by any specified assets?

The face value of bonds are denominated most commonly in which of the following standard increments?

Kruller A.G.issues a bond that is offered for sale simultaneously in Europe,the United States,and Japan.Which of the following best describes this bond?

A firm issues $500 million in straight bonds at par and a coupon rate of 5%.The firm pays fees of 3% on the face value of the bonds.What is the the net amount of funds that the debt issue will provide for the firm?