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Statement 1: Bond issuers can take additional loans against the properties that were considered as collaterals for the bonds.
Statement 2: Bond issuers can impose the taxes paid for registering the bonds against on the interest and principal claims of the bondholders.
Statement 3: Bond issuers can prioritize other claims of other creditors over the bondholders in cases of bankruptcy.
Statement 4: Bond issuers can pay dividends of shareholders even though the bondholders were not yet paid so long as the board of directors have decided on it.
Statement 5: Bond issuers can take additional loans that would potentially compromise the ability of the issuer to keep its promise so long as other creditors permit it.
a.All statements are true
b.Statements 1, 2 and 4 are true
c.Statements 2, 3 and 5 are true
d.Statements 2, 4 and 5 are true
e.Statements 3, 4 and 5 are true
f. All statements are false
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- Which of the following is a disadvantage to a corporation issuing bonds? Group of answer choices A)The required interest payment must be met each period. B)The liquid nature of the bonds makes them attractive to investors who may not want to hold them to maturity. c)The large principal payment due at maturity. d)Both the first and third answers above are both disadvantages. e)The first, second and third answers above are all disadvantages.arrow_forward46. Help me selecting the right answer. Thank youarrow_forwardTo be effective issuing and investing in bonds, knowledge of their terminology, characteristics, and features is essential. For example: • A bond’s refers to the interest payment or payments paid by a bond. • 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% Due 7-15-2055 @100.00 What is the issuing date of this bond? 7-15-2005 7-15-2055…arrow_forward
- 27. If a long-term bonds becomes callable due to the violation of a debt covenant Group of answer choices a. The debt may continue to be classified as long term if the entity believes the covenant can be renegotiated. b. The debt must be reclassified as current. c. Cash must be reserved to pay the debt. d. Retained earnings must be restricted in the amount of the debt.arrow_forwardWhat is a bond? Why might a company elect to sell bonds rather than borrow from a bank?arrow_forwardTerm bonds are a.bonds that give the issuing corporation the option of calling the bonds for redemption before the maturity date. b.bonds that give the holder the option of exchanging the bonds for capital stock of the corporation. c.bonds issued in a series so that a specified amount of the bonds matures each year. d.bonds that all have the same maturity date.arrow_forward
- please comment on the following statement: “An investor who purchases the mortgage bonds of a corporation knows that should the corporation become bankrupt, mortgage bondholders will be paid in full before the common stockholders receive any proceeds.”arrow_forwardWhen corporations issue bonds, there are two distinct obligations. What are those obligations? What do the following terms mean in regard to corporations issuing bonds: convertible, callable, and debenture?arrow_forwardProtective covenants: Select one: a. Are consistent for all bonds issued by a corporation within Canada. b. Are primarily designed to protect bondholders from future actions of the bond issuer. c. Are limited to stating actions which a firm must take. d. Are primarily designed to protect the issuing corporation from unreasonable demands of bondholders. e. Only apply to bonds that have a deferred call provision.arrow_forward
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