20.1   Learning Objective 20-1


1) A special type of long-term interest-bearing note payable issued by a corporation to raise capital is called a:

A) short-term note payable.

B) bond payable.

C) stock issue.

D) treasury stock issue.


2) The contract rate for a bond is:

A) the annual interest rate based on selling price.

B) the annual interest rate based on market value.

C) the annual interest rate based on face value.

D) None of these answers are correct.


3) The amount to be paid on the maturity date of a bond is called the:

A) face value of the bond.

B) current market value of the bond.

C) quoted value of the bond.

D) indenture amount of the bond.


4) The information on the bond certificate written by the corporation in a formal agreement is called:

A) a bond contract.

B) a bondholder’s agreement.

C) a bond indenture.

D) a bond quote.

5) Bond certificates state the:

A) market value and contract rate.

B) face value and contract rate.

C) market value and current interest rate.

D) face value and current interest rate.


6) Bailey Corporation has decided to issue bonds pledging specific assets. What type of bonds is it offering?

A) Secured bonds

B) Debenture bonds

C) Convertible bonds

D) Serial bonds


7) A $1,000 bond quoted at 96.5 would sell for:

A) $1,000.

B) $965.

C) $96.50.

D) None of the above.


8) A $1,000 bond quoted at 104 would sell for:

A) $1,104.

B) $1,000.

C) $104.

D) $1,040.

9) One reason a corporation might issue bonds rather than selling stock is that:

A) bond interest is a tax-deductible expense.

B) interest rates are high.

C) dividends will lower the amount of tax due.

D) bondholders have claims at liquidation.


10) When the maturities of a bond issue are spread over a several dates, the bonds are called:

A) term bonds.

B) bearer bonds.

C) debenture bonds.

D) serial bonds.





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