1. The carrying (book) value of a bond at the time when it is issued is always equal to its par value. T/F
2. Foreign exchange rates fluctuate due to changes in :
Select one: a. Political conditions. b. Economic conditions. c. Supply and demand for currencies. d. Expectations of future events. e. All of these.
3. A 10-year bond issue with a $100,000 par value, 8% annual contract rate, with interest payable semiannually means that the issuer must repay $100,000 at the end of 10 years and make 20 semiannual interest payments of $4,000 each. T/F
4. To provide security to creditors and to reduce interest costs, bonds and notes payable can be secured by:
Select one: a. Safe deposit boxes. b. Mortgages. c. Equity. d. The FASB. e. Debentures.
5. If the exchange rate for Canadian and U.S. dollars is 0.82777 to 1, this implies that 3 Canadian dollars will buy ____ worth of U.S. dollars.
Select one: a. $ 0.2759 b. $0.82777 c. $1.82777 d. $2.48 e. None of these.
6. A bondholder that owns a $1,000, 10%, 10-year bond has:
Select one: a. Ownership rights. b. The right to receive $10 per year until maturity. c. The right to receive $1,000 at maturity. d. The right to receive $10,000 at maturity. e. The right to receive dividends of $1,000 per year.
7. Short-term investments:
Select one: a. Are securities that management intends to convert to cash within the longer of one year or the current operating cycle, and are readily convertible to cash. b. Include funds earmarked for a special purpose such as bond sinking funds. c. Include stocks not intended to be converted into cash. d. Include bonds not intended to be converted into cash. e. Include sinking funds not intended to be converted into cash.
8. Long-term investments:
Select one: a. Are current assets. b. Include funds earmarked for a special purpose such as bond sinking funds. c. Must be readily convertible to cash. d. Are expected to be converted into cash within one year. e. Include only equity securities.