FINANCE

9.  When a bond sells at its face amount, the market rate of interest is ________.

 

irrelevant to investors

less than the bond’s stated rate of interest

greater than the bond’s stated rate of interest

equal to the bond’s stated rate of interest

 

10.  When a bond sells at less than its face amount, the market rate of interest is ________.

 

less than the bond’s stated rate of interest

equal to the bond’s stated rate of interest

greater than the bond’s stated rate of interest

irrelevant to investors

 

11.  When a bond sells for 102, the bond is selling at ________.

 

a premium

par

a discount

face value

 

12.  When a bond sells for 98, the bond is selling at ________.

 

face value

a discount

a premium

par

 

13.  On January 1, Wok ‘n’ Roll, Inc. issued $50,000 worth of 8%, 20-year bonds for $52,950. These bonds sold at ________.

 

face value

a premium

a discount

par

 

14.  On January 1, Bank, Rupp & Baroque, Inc. issued $50,000 worth of 10-year, 9% bonds for $48,890. These bonds sold at ________.

 

a discount

par

face value

a premium

 

15.  On January 1, Bank, Rupp & Baroque, Inc. issued $50,000 worth of 10-year, 9% bonds for $48,890. What is the amount of the first year’s interest payment?

 

$4,400.10

$1,100.00

$88.80

$4,500.00

 

16.  On November 1, 2011, The Mane Event, Inc. borrowed $40,000 from a local bank for 24 months at 11% annual interest. Both principal and interest are due when the note matures. Which statement below is TRUE?

 

The transaction represents a financing activity.

The note is a long-term liability on the balance sheet at Dec. 31, 2012.

The note is a current-term liability on the balance sheet at Dec. 31, 2011.

The transaction represents an investing activity.

 

17.  On January 1, 2011, Dew Drop Inn borrowed $80,000 at 8% interest. The loan will be repaid with equal annual installment payments of $8,900 made on the last day of each year, which is the company’s yearend. Notes payable at December 31, 2011 equals ________.

 

$80,000 on the balance sheet

$77,500 on the balance sheet

$80,000 on the income statement

 

18.  On October 31, 2011, Bondable, Inc. issued $20,000 of 10-year, 6% bonds at 100. The bonds pay interest annually on October 31. On its statement of cash flows for the year ended December 31, 2011, Bondable will show Cash paid for interest of ________.

 

$0

$(120) in the cash flows from operating activities section of the statement

$(200) in the cash flows from financing activities section of the statement

$(1,200) in the cash flows from operating activities section of the statement

 

19.  On November 30, 2011, Just in Thyme, Inc. issued $10,000 of 20-year, 9% bonds at 100. The bonds pay interest semiannually on May 31 and November 30. On its statement of cash flows for the year ended December 31, 2011, Just in Thyme will show Cash paid for interest of ________.

 

$(450) in the cash flows from operating activities section of the statement

$(900) in the cash flows from operating activities section of the statement

$0

$(75) in the cash flows from financing activities section of the statement

 

20.  If a company earns more with the money it borrows than it has to pay to borrow that money, it is called ________.

 

positive financial leverage

negative financial leverage

positive cost/benefit

negative cost/benefit

 

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