Problem 7-20 Multiple choice (IAA)1. A bond convertible by the holder into a fixed number ofordinary shares of the issuer isa. A compound financial instrumentb. A primary financial instrumentc. A derivative financial instrumentd. An equity instrument2. Convertible bondsa. Have priority over other indebtedness.b. Are usually secured by a mortgage.c. Pay interest only in the event net income is sufficientto cover the interest.d. May be exchanged for equity shares.3. What is the main reason for issuing convertible bond?a. The ease with which convertible bond is sold even ifthe entity has a poor credit rating.b.The fact that share capital has issue cost andconvertible bond has none.c. Entities can obtain financing at lower rate.d. Convertible bond always sells at a premium.4. The major difference between convertible bonds payableand bonds payable issued with share warrants is thatupon exercise of the share warrantsa: The shares are held by the issuer for a certain periodbefore issuance to the warrant holder.b. The holder has to pay a certain amount to obtain theshares.c. The shares involved are restricted.d. No share premium can be part of the transaction.5. Convertible bondsa. Are separated into the liability component and theexpense component.b. Allow an entity to issue debt financing at lower rate.c. Are separated into liability and equity componentsbased on fair value.d. All of the choices are correct.

note:- according to bartleby guidelines , if multiple questions are asked ,then 1st question needs…

Problem 7-20 Multiple choice (IAA) 1. A bond convertible by the holder into a fixed number of ordinary shares of the issuer is a. A compound financial instrument b. A primary financial instrument c. A derivative financial instrument d. An equity instrumente

Problem 7-20 Multiple choice (IAA) 1. A bond convertible by the holder into a fixed number of ordinary shares of the issuer is a. A compound financial instrument b. A primary financial instrument c. A derivative financial instrument d. An equity instrumente

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Chapter 10-Bond Vocabulary - Match each of the following terms with appropriate definitions: A. Bond Indenture B. Effective Interest Method C. Secured Bond D. Sinking Fund Bond E. Registered Bond F. Market Rate G. Bearer Bond H. Convertible Bond I. Debenture J. Serial Bond lo sgs 1. Records and tracks the bondholders' names or zabing 2. Is unsecured; backed only by the issuer's credit standing 3. Has varying maturity dates for amounts owed. 4. The interest rate that borrowers are willing to pay and that lenders are willing to accept for a particular bond based on its risk 5. Identifies rights and responsibilities of the issuer and the bondholders 6. Can be exchanged for shares of the issuer's stock 7. Is unregistered; interest is paid to whoever possesses them 8. An accounting method that allocates interest expense over the bonds' life in a way that yields a constant rate of interest 9. Maintains a separate asset account from which bondholders are paid at maturity 10. Pledges specific…
Q-k A bond is purchased at a discount and will be accounted for under the amortized cost model. The entry to record the amortization of the discount includes a O debit to the investment account. O debit to Interest Income. O credit to the investment account. O debit to "Gain from Discount."
Ma 2 Which of the following is NOT TRUE? Select one: O a. If the stated rate is equal to the market rate on the issuance date of a bond, no premium or discount on the bond will need to be recorded. O b. Private companies are required to amortize bonds payable using the effective-interest method. c. Public companies are required to amortize bonds payable using the effective-interest method. O d. All of the listed answers are not true. Notes
2. Characteristics of bonds A. To be effective issuing and investing in bonds, knowledge of their terminology, characteristics, and features is essential. For example: • A bond’s is generally $1,000 and represents the amount borrowed from the bond’s first purchaser. • A bond issuer is said to be in if it does not pay the interest or the principal in accordance with the terms of the indenture agreement or if it violates one or more of the issue’s restrictive covenants. • The contract that describes the terms of a borrowing arrangement between a firm that sells a bond issue and the investors who purchase the bonds is called . • A bond’s gives the issuer the right to call, or redeem, a bond at specific times and under specific conditions. Suppose you read an article about the Golden Gate Bridge and Highway District bonds. It includes the following information: Bridge Bonds Series A Dated 7-15-2005 4.375%…
48 Which of the following is true with regards to the accrued interest on bonds payable that are sold between interest dates? Group of answer choices The accrued interest is computed using the effective rate The accrued interest is extra income to the buyer and treated as bond issue cost of the buyer The accrued interest is added to the issue price of the bond to determine the total cash proceeds from bond issuance The accrued interest will be paid to the seller when the bonds mature
1 A long-term contract under which a borrower agrees to make payments of interest and principal on specific dates is called a: Group of answer choices common stock. preferred stock. bond. equity contract.
Multiple ChoiceIdentify the choice that best completes the statement or answers the question. 9. For a liability to exist, a. a past transaction or event must have occurred. b. the exact amount must be known. c. the identity of the party owed must be known. d. an obligation to pay cash in the future must exist. 10. The effective interest rate on bonds is higher than the stated rate when bonds sell a. at face value. b. above face value. c. below face value. d. at maturity value. 11. The effective interest rate on bonds is lower than the stated rate when bonds sell a. at maturity value. b. above face value. c. below face value. d. at face value. 12. When interest expense is calculated using the effective-interest amortization method, interest expense (assuming that interest is paid annually) always equals the a. actual amount of interest paid. b. book value of the…
q9. Bond premium should be reported in the statement of financial positionA. along with other premium accounts such as those resulting from stock transactions.B. as deferred credit.C. as a direct addition to the face amount of the bonds.D. as a deduction from the face of the bonds.
16. Bond issue costs a. should be amortized by the straight-line method to interest expenseb. should be included in bond discount or subtracted from bond premium and amortized by the effective-interest methodc. should be subtracted from bonds payable on the balance sheetd. should not be amortized and should be written off at bond retirement
Ch 07- Assignment - Bonds and Their Valuation Fixed-income securities consist of debt instruments and preferred stock. Bonds are debt securitie interest rate and principal at a future date. Which of the following types of bonds have the least default risk? O Treasury bonds O Corporate bonds O Municipal bonds Based on the information given in the following statement, answer the questions that follow:
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.
q2 Bonds payable are initially recognized atA. issue price minus transaction costs incurred by the entity.B. issue priceC. issue price plus accrued interestD. face value

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