Question : 24.              In a debt instrument, named assets that creditors will : 1370056

24.              In a debt instrument, named assets that creditors will receive if the borrower defaults on the note are called:

A)collateral

B)covenants

C)debentures

D)leveraged assets

25.              A long-term note secured by land or buildings that serve as collateral, is referred to as a:

A)mortgage

B)debenture

C)property dividend

D)subordinated note

26.              A bond issue which specifies that certain portions of the total bond issue are due periodically over the life of the bond is called a:

A)serial bond

B)bond indenture

C)registered bond

D)redeemable bond

27.              Cabal Company issued debentures with a face interest rate of 6 percent and a market interest rate of 5 percent.  How will interest expense compare to the cash interest paid each period?

A)interest expense will be greater

B)interest expense will be less

C)they will be equal

D)unable to determine from the information given

28.              On January 1, 2010, Complot Corporation issued debentures with a face interest rate of 6 percent and a market interest rate of 7 percent.  How will interest expense in 2010 compare with cash interest paid and due in 2010?

A)it will be the same

B)it will be greater

C)it will be less

D)unable to determine from the information given

29.              Which of the following statements about convertible bonds is/are true?

A)conversion of bonds into stock is at the issuing firm’s option

B)convertible bonds usually have a higher interest rate than nonconvertible bonds

C)the bonds will be converted only if the value of the stock is greater than the value of the bonds

D)all of the above are true

30.              Bonds with a face interest rate receive cash proceeds equal to the present value of the

A)principal to be paid at the maturity date

B)interest to be paid over the term of the bonds

C)interest to be paid over the term of the bonds plus the present value of the principal to be paid at the maturity date

D)interest to be paid over the term of the bonds minus the present value of the principal to be paid at the maturity date

31.              The cash interest paid on a note during a period is equal to the

A)maturity value multiplied times the face interest rate.

B)maturity value multiplied times the effective interest rate.

C)carrying value at the beginning of the period multiplied times the face interest rate

D)carrying value at the beginning of the period multiplied times the effective interest rate

32.              The interest expense on a note during a period is equal to the

A)maturity value multiplied times the face interest rate.

B)maturity value multiplied times the effective interest rate.

C)carrying value at the beginning of the period multiplied times the face interest rate

D)carrying value at the beginning of the period multiplied times the effective interest rate

33.              The total amount of interest expense over the life of a note is:

A)The face value times the face interest rate times the number of interest payments over the life of the note.

B)The face value of the note times the market interest rate times the number of interest payments over the life of the note.

C)The total of the cash outflows of the note over the life of the note less the proceeds of the note.

D)The proceeds of the note plus the cash interest paid less the maturity value of the note.