Which of the following trends can be unfavorable from the viewpoint of a bondholder? a. The issuing company’s debt ratio is steadily declining. b. The issuing company’s interest coverage ratio is steadily rising. c. Market interest rates are steadily rising. d. The issuing company’s net cash flow from operating activities is steadily increasing.

Under which of the following situation, would a firm most likely to  call its outstanding callable bonds? Group of answer choices a)The firm has financial distress. b)The company’s bonds are downgraded. c)The market interest rate increases d)The market interest rate declines

Du Pont Analysis. CFA Corp. has a debt-equity ratio that is lower than the industry average, but its cash coverage ratio is also lower than the industry average.  What might explain this seeming contradiction?

The zero-lower-bound problem: A. creates a negative shock to the economy. B. occurs because people can always earn more from holding bonds than holding cash... C. is responsible for the recession of 2007-2009. OD. implies that nominal interest rates can be zero.

Economic conditions in Fredland have caused the demand for money to increase which has changed the nominal interest rate. If the central bank wants to counteract this change, which of the following is an appropriate open market operation to achieve that? Select one: O a. Raise the discount rate. O b. Increase taxes. O c. Decrease the reserve requirement. O d. Sell bonds. O e. Buy bonds.

Suppose a company is choosing between bank loans and bonds. The interest rate in the bank loan is 3.5%, and an investment bank predicted that the company will pay close to 4% to issue a bond with the same maturity. In addition, fees are estimated to be higher for the bond issuance than for the bank loan. Explain why this company may still decide to issue the bond rather than borrowing through a bank.

Both EV-to-EBITDA and PE multiples can be linked to interest rates through the discount rate used in discounted cash flow valuation. Holding all else equal, when discount rates are higher, valuation ratios are lower. Perhaps because of this, we tend to see stock prices as well as, the value of private business transactions decline when interest rates increase. Macroeconomists like to describe interest rates as consisting of two components: the real interest rate component and an expected inflation component. In some situations, increases in interest rates are the result of an increasing real interest rate; in other situations, the cause of an interest rate increase is an increase in expected inflation. How might valuation ratios be expected to respond to an interest rate increase generated by an increase in expected inflation versus an interest rate increase that represents an increase in real interest rates?

If the Federal Reserve sells more Treasury securities, overall interest rates go up.  True  False

Regarding the following statements about credit fixed income, identify who is correct (select all that apply):     a. Meeyeon: "Credit spreads tighten when the economy is strong, and there is a continued positive outlook."   b. Andrew: "Subordinated debentures are riskier for investors than senior debt." c. Greg: "The G-spread only measures the credit spread between a bond and a government curve over one point of time." d. Yuting: "Investment-grade credit never defaults."   (only a and b is incorrect)

Exercise 16-8 (Algo) Selected Financial Ratios [LO16-2, LO16-3, LO16-4] The financial statements for Castile Products, Incorporated, are given below: Castile Products, Incorporated Balance Sheet December 31 Assets Current assets: $ 22,000 160,000 380,000 Cash Accounts receivable, net Merchandise inventory 11,000 573,000 Prepaid expenses Total current assets Property and equipment, net 820,000 Total assets $ 1,393,000 Liabilities and Stockholders' Equity Liabilities: $ 260,000 370,000 630,000 Current liabilities Bonds payable, 11% Total liabilities Stockholders' equity: Common stock, $10 par value Retained earnings Total stockholders' equity $ 110,000 653,000 763,000 Total liabilities and stockholders' equity $ 1,393,000 Castile Products, Incorporated Income Statement For the Year Ended December 31 $ 3,300,000 1,137,500 2,162,500 630,000 1,532,500 40,700 Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income Interest expense 1,491,800 447,540 Net…