Question : 51. Firms typically borrow from banks, insurance companies, and other financial : 1230317

51. Firms typically borrow from banks, insurance companies, and other financial institutions by signing a note, which specifies the terms of the borrowing arrangement. The initial valuation of the loan equals _____. 
A. the future value of the present cash payments discounted at the yield required by the borrower.
B. the future value of the present cash payments discounted at the yield required by the lender.
C. the present value of the future cash payments discounted at the yield required by the borrower.
D. the present value of the future cash payments discounted at the yield required by the lender.
E. the future value of the present cash payments undiscounted.

52. When the stated interest rate for a loan equals the yield required by the lender, then the amount borrowed equals the  
A. principal amount of the loan
B. principal amount of the loan plus a premium.
C. principal amount of the loan less a discount.
D. fair amount of the loan.
E. fair amount of the loan less a discount.

53. The amount reported on the balance sheet throughout the life of a loan (that is, its carrying value) equals  
A. the future value of the remaining cash flows discounted at the historical market interest rate.
B. the present value of the remaining cash flows discounted at the historical market interest rate.
C. the future value of the remaining cash flows discounted at the current market interest rate.
D. the present value of the remaining cash flows discounted at the current market interest rate.
E. the future value of the remaining cash flows discounted at the fair market interest rate.

54. A firm that does not account for long-term notes and bonds using the fair value option, uses the _____ to account for the loan while it is outstanding.  
A. present and future market interest rates
B. future market interest rates
C. fair market interest rates
D. historical market interest rate
E. current market interest rate

55. Common terminology refers to the calculations for amortizing a financial instrument to its maturity value over time as the _____ interest method. 
A. efficient
B. economical
C. market
D. effective
E. imputed

56. When using the effective interest method the amount of interest expense each period equals the 
A. current market interest rate times the carrying value of the financial instrument at the date of issuance.
B. current market interest rate times the carrying value of the financial instrument at the beginning of each period.
C. historical market interest rate times the carrying value of the financial instrument at the date of issuance.
D. historical market interest rate times the carrying value of the financial instrument at the beginning of each period.
E. fair market interest rate times the carrying value of the financial instrument at the date of issuance.

57. _____ often advise corporate borrowers on the sorts of financial instruments the lending market appears to prefer at the time the firm wants to borrow.  
A. Stockbrokers
B. Investment bankers
C. Underwriters
D. Board of Directors
E. Chief Financial Officers

58. An initial issue price equal to the face value of the bonds means that the implicit interest rate equals the _____. 
A. fair interest rate
B. average interest rate
C. future interest rate
D. yield to maturity
E. past interest rate

59. Authoritative guidance requires firms that account for notes and bonds using the _____ market interest rate to report the carrying values, or book values, on the balance sheet and to disclose the _____ of these notes and bonds in notes to the financial statements. 
A. average; historical market interest rates
B. historical; future value
C. current; future value
D. historical, fair value
E. current; historical market interest rates

60. The fair value of long-term debt 
A. is the amount the firm would have to pay to repurchase the debt on the market in an orderly transaction on the measurement date.
B. is the market price of the bonds on that date, if the bonds trade in an active market.
C. is the present value of the contractual cash payments discounted at the interest rate a lender would require on the measurement date, if the fair value of bonds are not actively traded.
D. all of the above
E. none of the above