Please answer with reason for all why the option is correct and why the other options are incorrect Question 7 - Bonds issued with a provision that they may be called for redemption before the date of maturity are known as convertible bonds. term bonds. debenture bonds. callable bonds.
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Please answer with reason for all why the option is correct and why the other options are incorrect
Question 7 - Bonds issued with a provision that they may be called for redemption before the date of maturity are known as
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convertible bonds. |
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term bonds. |
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debenture bonds. |
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callable bonds. |
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- A callable bond: Select one: a. can be paid off early at either the issuer's or the bondholder's request b. can have its maturity date extended by the issuer c. can be redeemed early if the bondholder so requests d. can be redeemed by the issuer prior to maturity e. is a bond that pays a variable interest paymentMoving to another question will save this response. Quèstion 6 In bond financing, if the interest on bonds (contract rate) higher than the market interest rate; the bonds will be issued with: O A. par value. O B. premium on bonds payable. OCa specific maturity date. O D. discount on bonds payable.Question 43: Spreading out the impact of a bond discount or bond premium over the life of the bond is referred to as bond amortization. Answer: A. TrueB. False
- (Bond Theory: Amortization and Gain or Loss Recognition)Part I: The appropriate method of amortizing a premium or discount on issuance of bonds is the effective-interest method.Instructions(a) What is the effective-interest method of amortization and how is it different from and similar to the straight-line method of amortization?(b) How is amortization computed using the effective-interest method, and why and how do amounts obtained using the effective-interest method differ from amounts computed under the straight-line method?Part II: Gains or losses from the early extinguishment of debt that is refunded can theoretically be accounted for in three ways:1. Amortized over remaining life of old debt.2. Amortized over the life of the new debt issue.3. Recognized in the period of extinguishment.Instructions(a) Develop supporting arguments for each of the three theoretical methods of accounting for gains and losses from the early extinguishment of debt.(b) Which of the methods above is…6. Which of the following is true of demand bonds?a. They give the issuer the right to call the bonds at a preestablished price.b. They give the issuer the right to demand that the bondholders purchase additional bonds at a preestablished price.c. They give the bondholder the right to demand repayment prior to maturity.d. They give the bondholder the right of first refusal with respect to any additional bonds sold by the issuer. 7. Demand bonds should be reported as governmental fund liabilitiesa. if the government has not entered into a take-out agreement.b. if prevailing interest rates are higher than the interest rate on the bonds.c. if prevailing interest rates are lower than the interest rate on the bonds.d. if the government, by the time it issues its financial statements, has neither refinanced the bonds nor entered into an agreement to do so.A callable bond allows the person holding the bond to redeem it before its maturity date for the par value. a. true b. false
- Which of the following would describe a callable bond? Oa. Borrower has the right to issue more bonds prior to due date of existing bonds. Ob. Borrower has the right to call off the interest payments on the bonds. Oc. Investor has the right to call off the interest payments on the bonds. C. d. Borrower has the right to pay off the bonds prior to due date.A bond that has only one payment, which occurs at maturity, defines which one of these types of bonds?Bonds which require the face value (principal) amount to be paid back in installments over the life of the bond are called: Select one: a. serial bonds. b. convertible bonds. c. callable bonds. d. unsecured bonds. e. term bonds. f. secured bonds.
- Bonds that may be redeemed prior to maturity at the option of the issuer are called a. early retirement bonds b. options c. callable bonds d. debentures14. If bonds are redeemed on maturity date, any premium or discount * a. Is carried forward and written off in the same manner as that used prior to the maturity date. b. Should be used to calculate the O gain or loss resulting from the maturity of the bonds. c. Should be written off directly to a O bond retirement account as the bond will be redeemed. d. Will be fully amortized as its amortization period is designed to coincide with the life of the bond issue.PROBLEM: 1. Match the following bond classifications with the appropriate characteristic by entering the appropriate letter in the space provided. Zero-coupon bonds f. Callable bonds а. Debenture bonds е. Mortgage bonds Registered bonds d. b. с. Convertible bonds g. h. Coupon bonds Serial bonds 1. Portions of the bond mature in periodic installments. 2. Unregistered bonds. 3. Bonds that are secured by a lien against specific assets. 4. Bonds that can be exchanged for a predetermined number of shares of stock. 5. Bonds whose marketability is based on the general credit rating of the issuing company. 6. Bonds whose interest is paid to the individuals listed in the corporate records as owners of the bonds. 7. Bonds that the company has the right to retire before their maturity date. 8. Bonds on which no interest is paid until the maturity date.