Study Questions for Chapter 14 - Part 1

Study Questions for Chapter 14 - Part 1 - happening here 3...

Info icon This preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Study Questions for Chapter 14 – Part 1 1. Why do individuals and businesses borrow money on a long term basis? What type of agreement does the borrower enter into with the lender? What are the risks and rewards for each party? 2. What are the options for a corporation to raise capital to do a new project? Can common stockholders, the basic owners of the corporation, benefit from financing with long term debt? Explain the circumstances under which they benefit, and the circumstances under which they do not benefit from using debt to finance a new project. Can you explain why this happens? (Hint, Study Exhibits 1 and 2 and Example Exercise 14-1 and explain in your own words what is
Image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: happening here.) 3. What is a bond, and what happens when a corporation issues a bond? Who are the parties involved? What does the corporation promise to do when they issue a bond? 4. Define the following terms: Bond indenture Contract/coupon/ or stated rate Market rate Bond discount Bond premium 5. Explain the relationship between the contract rate, the market rate, and bond discounts and premiums. (Hint, you will not be able to do this one well from what is presented on page 621 only, you will need to work through pages 622 to 626 to understand these relationships)....
View Full Document

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern