Financial Accounting 2 Quiz 15-03008FA Name: ____________________________________________ Course & Section: __________________ General Direction: Write your answer on a separate yellow paper. Pass the test paper and answer sheet after completing the exam. Part 1 – Theories – Multiple Choice. 1. Transaction whereby a debtor and creditor may negotiate the terms of a financial liability with the result that the liability is fully or partially extinguished by the debtor issuing equity instruments
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The Open Polytechnic of New Zealand Trimester 1‚ 2012 71303 Corporate Finance Final Examination Time allowed Three hours‚ plus 10 minutes to read this paper. Instructions 1. 2. 3. 4. Answer all questions. Read each question carefully. Start each question on a new page. Show all of your workings. Mark allocation Question Part A Part B 1. 2. 3. 4. 5. Cost of capital Risk and return Investment timing real option Capital structure Dividend policy 14 12 15 20 15 Total 100 Topic Multiple-choice
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7/3/2011 Re: Bond Features: Effects and Benefits to Coupon Rate Answers to questions regarding bond features and how they will positively and negatively affect the coupon rate per Kim McKenzie. 1. The security of the bond: whether the bond has collateral. The more secure the bond is to the investor‚ the lower the interest rate or bond coupon. Therefore‚ with collateral backing the bond‚ the coupon will be lower. The disadvantage of using company collateral to back the bonds is‚ the asset
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spread represents mispricing of two bonds‚ both with the same maturity but one with a coupon rate of 10.625% and the other 4.25%. Our investigation also determines if the yield spread represents an arbitrage opportunity. In our investigation‚ we calculate the theoretical yield spread between the two bonds and compare the figure with the observed yield spread. It is cited in the case that the observed yield spread could be due to different liquidity premium for each bond or simply due to different durations
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Consider the following two bond issues. Bond A: 5% 15-year bond Bond B: 5% 30-year bond Neither bond has an embedded option. Both bonds are trading in the market at the same yield. Which bond will fluctuate more in price when interest rates change? Why? The 30 year bond will fluctuate more in price. This is because of the sensitivity factor of bonds. The longer the bond is the more delayed the full payment is at the end of the bonds maturity. Therefore this bond is more sensitive and risky
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Chapter 1: Bond Prices‚ Discount Factors and Arbitrage 1. Use this list of Treasury bond prices as of January 15‚ 2013 (which should be taken as the current date for all the questions below except for question 7) to derive the discount factors for cash flows to be received in 0.5‚ 1‚ 1.5 and 2 years. Bond Price 6.0s of 7/15/13 102-15+ 5.0s of 1/15/14 103-7 3/4 8.0s of 7/15/14 107-24 4.0s of 1/15/15 100-23 1/2 Answer: (a) To find d(0.5) The equation from the 6.0s of 15 July
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Question 1: Lynos Document Storage’s controller‚ Eric Petro‚ told Rene that the bonds were issued in 1999 at a discount and that only approximately $9.1 million was received in cash. Explain what is meant by the terms “premium” or “discount” as they relate to bonds. Compute exactly how much the company received from its 8% bonds if the rate prevailing at the time of the original issue was 9% as indicated in Exhibit 2. Also‚ re-compute the amounts shown in the balance sheet at December 31‚ 2006‚
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CHAPTER 14 Long-Term Liabilities ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics 1. Long-term liability; classification; definitions. Issuance of bonds; types of bonds. Premium and discount; amortization schedules. Questions 1‚ 10‚ 14‚ 20‚ 23‚ 24‚ 25 2‚ 3‚ 4‚ 9‚ 10‚ 11 5‚ 6‚ 7‚ 8‚ 11 1‚ 2‚ 3‚ 4‚ 5‚ 6‚ 7 3‚ 4‚ 6‚ 7‚ 8‚ 10 Brief Exercises Exercises 1‚ 2 Problems 10‚ 11 Concepts for Analysis 1‚ 2‚ 3 2. 3‚ 4‚ 5‚ 6‚ 7‚ 8‚ 9‚ 10‚ 11 4‚ 5‚ 6‚ 7‚ 8‚ 9‚ 10‚ 11‚ 13‚ 14‚ 15 12‚ 13‚ 14‚ 15 16‚ 17
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optimize the yield on temporary surplus fund. What is it? The money market is a subsection of the fixed income market. We generally think of the term fixed income as being synonymous to bonds. In reality‚ a bond is just one type of fixed income security. The difference between the money market and the bond market is that the money market specializes in very short-term debt securities (debt that matures in less than one year). Money markets investments are also called cash investments because of
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1. Travis Corp.’s bonds currently sell for $1‚050. They have an 8% annual coupon rate and a 20-year maturity‚ but they can be called in 5 years at $1‚120. Assume that no costs other than the call premium would be incurred to call and refund the bonds‚ and also assume that the yield curve is horizontal‚ with rates expected to remain at current levels on into the future. Under these conditions‚ what rate of return should an investor expect to earn if he or she purchases these bonds? a. | 7.51% |
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