Question 1
A bond’s price decreases from par value to $925 due to a change in interest rates. All other things equal, this a good example of which of the following?
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interest rate risk
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default risk
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liquidity risk
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reinvestment risk
Question 2
A company is planning to raise $2 million to finance a new plant. Which statement regarding the cost of debt is true?
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The company would prefer to issue a bond without a call provision if its management thinks that interest rates are almost certain to decrease in the foreseeable future.
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If two tiers of debt are used (with one senior and one subordinated debt class) to raise the $2 million, the senior debt will carry ahigher interest rate.
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If debt is used to raise the $2 million, with $0.7 million as first mortgage bonds on the new plant and $1.3 million as debentures, the interest rate on the first mortgage bonds would be lower than it would be if the entire $2 million were raised by selling first mortgage bonds.
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If debt is used to raise the $2 million, the cost of the debt would be lower if the debt were in the form of an unsecured term loan rather than a mortgage bond.
Crop plants developed by selective breeding of the wild mustard plant.
How plant cells take up and transform nitrate
Plant
Plant Cell
Large families on U.S. farms used to be common. Children helped plant and harvest crops, take care ...
Introduction to Corporate Finance, 5th