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Unformatted text preview: Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the below statements is FALSE? 1) A) Warrants may be attached as part of a bond issue with each warrant granting the holder the right to purchase a designated security at a specified price from the issuer of the bond. B) A callable bond grants the bondholder the right to sell the issue back to the issuer at par value on designated dates. C) Zero- coupon bonds are bonds without coupon payments or a stated interest rate. D) The conversion provision in a corporate bond issue grants the bondholder the right to convert the bond to a predetermined number of shares of common stock of the issuer. 2) One of the four general classifications used by bond information includes the class called "utilities," which can be further broken down into ________. 2) A) electric power companies, gas distribution companies, water companies, and communication companies. B) manufacturing, merchandising, and service companies. C) airlines, railroads, and trucking companies. D) depository institutions, non- life insurance companies, and mutual funds. 3) Features of a corporate bond include ________. 3) A) prior legal claim by preferred stockholders over common and bondholders as to both income and assets of the corporation for the principal and interest due them. B) failure to pay either principal or interest when due constitutes legal default, and court proceedings can be instituted to enforce the contract. C) promises by the corporate issuer to repay par or principal value of the bond after the maturity date. D) promises by the corporate issuer to pay a specified percentage of the bond's market value on designated dates. 4) ________ companies can be divided into airlines, railroads, and trucking companies. 4) A) Industrial B) Banks and finance C) Transportations D) Utilities 5) Which of the below statements is FALSE? 5) A) A guaranteed bond is an obligation guaranteed by another entity. B) Refunding is much more comprehensive than call protection because it prohibits the early redemption of the bonds for any reason C) A callable corporate bonds is generally callable at a premium above par with the amount of the premium declining as the bond approaches maturity. D) Most corporate issues have a call provision allowing the issuer an option to buy back all or part of the issue prior to maturity. 1 6) By senior corporate securities, we mean that the holder of the senior security has priority over the ________. 6) A) equity owners in the case of bankruptcy of a corporation. B) all other senior debt owners in the case of restructuring of a corporation....
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- Spring '09