Premium Essay

Bond Test

In: Business and Management

Submitted By oddauc
Words 1010
Pages 5
14.4 Ch 14 Quiz
Review of attempt 2 Started on | Monday, February 18, 2013, 09:44 PM | Completed on | Monday, February 18, 2013, 10:08 PM | Time taken | 23 mins 56 secs | Grade | 9 out of a maximum of 10 (90%) |
Question1
Marks: 1
The party that has the right to exercise the call option on callable bonds is(are):
Choose one answer. | a. The bondholders. | | | b. The bond issuer. | | | c. The bond indenture. | | | d. The bond trustee. | | | e. The bond underwriter. | |
Correct
Marks for this submission: 1/1.
Question2
Marks: 1
To provide security to creditors and to reduce interest costs, bonds and notes payable can be secured by:
Choose one answer. | a. Safe deposit boxes. | | | b. Mortgages. | | | c. Equity. | | | d. The FASB. | | | e. Debentures. | |
Correct
Marks for this submission: 1/1.
Question3
Marks: 1
A company issued 5-year, 7% bonds with a par value of $100,000. The market rate when the bonds were issued was 6.5%. The company received $101,137 cash for the bonds. Using the straight-line method, the amount of recorded interest expense for the first semiannual interest period is:
Choose one answer. | a. $3,386.30. | | | b. $3,500.00. | | | c. $3,613,70. | | | d. $6,633.70. | | | e. $7,000.00. | |
Correct
Marks for this submission: 1/1.
Question4
Marks: 1
On January 1 of Year 1, Drum Line Airways issued $3,500,000 of par value bonds for $3,200,000. The bonds pay interest semiannually on January 1 and July 1. The contract rate of interest is 7% while the market rate of interest for similar bonds is 8%. The bond premium or discount is being amortized at a rate of $10,000 every six months.
The amount of interest expense recognized by Drum Line Airways on the bond issue in Year 1 would be:
Choose one answer. | a. $132,500. | | | b. $225,000. | | | c. $265,000.

Similar Documents

Free Essay

Ball Bond Reliabilty: Fem of Pull and Shear Test

...Ball Bond Reliability: Simulation of Pull and Shear Test 1. This is a student paper, and some names have changed from the original abstract. I’m Electrical Engineering student and the topic is the simulation of pull and shear tests for ball bonds by finite element methods. 2. Here we see a Au ball bond, and models that we have created in AYSYS at the university to simulate it. The bond ball shown is fully bonded to a pad Al film, which is bonded to other films in the bond pad stack of a 4-level metal IC. We use 3D modeling with about 250-thousand nodes. The lower picture shows a simulated shear tool of W material. Pull test is simulated by applying a force to the top, and shear test is by applying a horizontal force to the W. Purposes for this project are listed here. We are using 3D FEM to simulate the stresses experienced by the ball bond during pull and shear testing. We want to examine the stress locations and magnitudes, and see what a bond might experience as we change the wire material, pull angle, bond pad metallization, pad Al thickness, and circuitry under pad. 3. The Bond Pull Strength test typically follows a Mil standard, 883G method 2011. 25-micron Au wire is considered reliable if the bond does not pull off below 3 gram-Force, or about 30milli-Newtons. The pull angle for the bond on the IC can actually vary in practice. 4. The Bond Shear test follows a JEDEC standard in JESD22, method B116A . In this test, the tool pushes on...

Words: 2350 - Pages: 10

Premium Essay

Employee Selection Process

...qualification, qualities required and work conditions etc. Advertisement:- Based on the information collected in step 1, the HR department prepares an advertisement and publishes it in a leading news papers. The advertisement conveys details about the last date for application, the address to which the application must be sent etc. Application blank/form :- Application blank is the application form to be filled by the candidate when he applies for a job in the company. The application blank collects information consisting of 4 parts- 1) Personal details 2) Educational details 3) Work experience 4) Family background. Written test :- The application which have been received are screened by the HR department and those applications which are incomplete arerejected. The other candidates are called for the written test. Arrangement for the written test is looked after the HR department i.e....

Words: 865 - Pages: 4

Free Essay

Accounting Case Study

...stockholders’ equity. Statement of cash flows and accounting issues related with accounting changes and error correction are also covered in this class. Prerequisite: ACCT 320A or equivalent with a grade C or better Grading: Points are distributed as follows. Accounting majors must earn a grade of “C” or better in each accounting class taken to graduate. Midterms 100 250-300 A Final 130 210-249 B Participation & Attendance 10 180-209 C Comprehensive test 20 150-179 D Homework 40 Below 150 F Total 300 points A modified curve may be applied at the end of the quarter if necessary. Withdrawal Policy: The dropping policies of the University and Accounting Department will be strictly enforced. Drops are permitted only for serious and compelling reasons after the Drop Period. Poor performance in the class is not considered to be a compelling reason. NO MAKE-UP exam will be given. If you are unable to take the test, you need to inform me before the exam date. Academic Integrity:...

Words: 547 - Pages: 3

Premium Essay

Student

...Deal?: A Conditional Assessment of their Role in a Nominal Portfolio Abstract This paper documents predictable time-variation in the real return beta of U.S. Treasury inflation protected securities (TIPS) and in the Sharpe ratios of both indexed and conventional bonds. The conditional mean and volatility of both bonds and their conditional correlation are first estimated from predetermined variables. These estimates are then used to compute conditional real return betas and Sharpe ratios. The time-variation in real return betas and the correlation between TIPS and nominal bonds coincides with major developments in the fixed income market. One implication of this predictability is that portfolio managers can assess more efficiently the risk of investing in TIPS versus conventional bonds. Conditional Sharpe ratios indicate that over the sample period, TIPS had superior volatility-adjusted returns relative to nominal bonds. This finding is striking in view of the absence of a major inflation scare during the sample period from February 1997 through August 2001, but is loosely consistent with the possibility that TIPS elevated rather than reduced Treasury borrowing costs. On the other hand, mean-variance spanning tests...

Words: 13262 - Pages: 54

Premium Essay

Week 3 Self Quiz

...Multiple Choice | 5 | 3 | | | Grade Details - All Questions |  1. | Question : | Which of the following bonds would have the greatest percentage increase in value if all interest rates fell by 1%? | |   | Student Answer: | |  10-year, zero coupon bond |   | | |  20-year, 10% coupon bond |   | | |  20-year, 5% coupon bond |   | | |  1-year, 10% coupon bond |   | | |  20-year, zero coupon bond | | |   | Points Received: | 6 of 6 |   | Comments: | | | |  2. | Question : | Which of the following statements is most correct? | |   | Student Answer: | |  Characteristic line is another name for the security market line. |   | | |  The characteristic line is the regression line that results from plotting the returns on a particular stock versus the returns on a stock from a different industry. |   | | |  The slope of the characteristic line is the stock's standard deviation. |   | | |  The distance of the plot points from the characteristic line is a measure of the stock's market risk. |   | | |  The distance of the plot points from the characteristic line is a measure of the stock's diversifiable risk. | | |   | Points Received: | 0 of 6 |   | Comments: | | | |  3. | Question : | Which of the following statements is most correct? | |   | Student Answer: | |  A. Tests have shown that the betas of individual stocks are unstable over time, but that the betas of large portfolios are...

Words: 470 - Pages: 2

Premium Essay

Finance Chapter 6

...Chapter 6 Bonds and their Valuation OVERVIEW This chapter presents a discussion of the key characteristics of bonds, and then uses time value of money concepts to determine bond values. Bonds are one of the most important types of securities to investors, and are a major source of financing for corporations and governments. The value of any financial asset is the present value of the cash flows expected from that asset. Therefore, once the cash flows have been estimated, and a discount rate determined, the value of the financial asset can be calculated. A bond is valued as the present value of the stream of interest payments (an annuity) plus the present value of the par value, which is the principal amount for the bond, and is received by the investor on the bond’s maturity date. Depending on the relationship between the current interest rate and the bond’s coupon rate, a bond can sell at its par value, at a discount, or at a premium. The total rate of return on a bond is comprised of two components: interest yield and capital gains yield. The bond valuation concepts developed earlier in the chapter are used to illustrate interest rate and reinvestment rate risk. In addition, default risk, various types of corporate bonds, bond ratings, and bond markets are discussed. Outline A bond is a long-term contract under which a borrower agrees to make payments of interest and principal, on specific dates, to the holders of the bond. There are four...

Words: 6887 - Pages: 28

Free Essay

Effects of Changes in Sovereign Credit Ratings on Investors’ Behavior

...Utrecht, the Netherlands Author: A.D. Hollaar Project-Coordinator: J.H.J.Lukkezen Course-Coordinator: dr. C. Remery Course: Applied Economics Research Course Date: 13th of November, 2011 Table of Contents Abstract 2 Introduction 3 Section I: Theory 5 1.1 Sovereign bonds and credit rating agencies 5 1.2 Measures for investors behavior 6 1.3 Expected behavior of investors 11 1.4 Related literature 15 1.5 Models 16 Section II: Data & Stylized facts 17 2.1 Data 17 2.2 Stylized facts 20 Section III: Empirical analyses 26 3.1 Effect of rating events on investors’ behavior 27 3.2 Effect of business cycles on investors’ behavior surrounding rating events 33 Conclusion 46 Reference list 48 Appendix 52 Section I: Rating symbols & definitions 52 Section II: Tables 54 Section III: Figures 56 Section IV: Extended theory 57 Section V: Graphs 59 Section VI: Data 67 Section VII: Testing classical assumptions 71 Abstract Firstly, this paper investigates if investors react to changes in sovereign credit ratings. Hereby rating changes for European, Non-European and European Union countries are considered for the period: 1990-2011. Using both bond spreads and credit default swap (CDS) spreads as measures for investors’ behavior, analysis shows that changes in sovereign credit ratings significantly affect these spreads. Furthermore evidence is found that a rating downgrade of a sovereign country has a bigger impact on the spreads...

Words: 21349 - Pages: 86

Premium Essay

Credit Management

...How did increased competition affect credit ratings? Bo Becker Todd Milbourn Working Paper 09-051 Copyright © 2008, 2009, 2010 by Bo Becker and Todd Milbourn Working papers are in draft form. This working paper is distributed for purposes of comment and discussion only. It may not be reproduced without permission of the copyright holder. Copies of working papers are available from the author. How did increased competition affect credit ratings? Draft Date: September 15, 2010 Bo Becker and Todd Milbourn* Abstract. The credit rating industry has historically been dominated by just two agencies, Moody’s and S&P, leading to longstanding legislative and regulatory calls for increased competition. The material entry of a third rating agency (Fitch) to the competitive landscape offers a unique experiment to empirically examine how in fact increased competition affects the credit ratings market. Increased competition from Fitch coincides with lower quality ratings from the incumbents: rating levels went up, the correlation between ratings and market-implied yields fell, and the ability of ratings to predict default deteriorated. We offer several possible explanations for these findings that are linked to existing theories. Key words: Credit ratings; competition and reputation; information quality * Harvard Business School (Becker) and Washington University in St Louis (Milbourn). Contact author’s e-mail address: bbecker@hbs.edu. We wish to thank Pierluigi Balduzzi...

Words: 19527 - Pages: 79

Premium Essay

The Great Illusion

...the Thomas Jeffery Hogan and R. David Mautz, Jr., “Earnings per share (EPS) is considered by some to be the single most important item in the financial statements” (Hogan and Mautz, Jr., 1991, p. 50). Reasons for this are that they are known to be disclosed in statements of public companies as well as a figure auditors refer to. However, earnings per share may not really be the number investors should look at. Concepts Statement #2 requires that in order for information to be useful, it must be relevant and reliable. There seem to be problems with EPS due to the way it is computed and disclosed. Such problems consist of determining what constitutes common stock equivalencies, including stock options and warrants, the effective yield test, and the two types of EPS. There is difficulty in determining what constitutes common stock. According to Thomas Jeffery Hogan and R. David Mautz, Jr., “Common stock equivalents are convertible securities that derive a major portion of their value from the fact that they can be exchanged for common stock” (Hogan and Mautz, Jr., 1991, p. 50). Also once a security I deemed to be a common stock equivalent, it always will be. The reverse of this situation is also true, if a security is not found to be common stock equivalent, it never will be. This is not good because factors in the economy may cause conditions that will reason an effective yield of a specific company to increase or decrease. Stock options and warrants are always considered...

Words: 758 - Pages: 4

Premium Essay

Finance

...1. What is the Fisher hypothesis? Is it Valid? Explain The Fisher hypothesis (sometimes called the Fisher effect) is the proposition by Irving Fisher that the real interest rate is independent of monetary measures, specifically the nominal interest rate and the expected inflation rate. The term "nominal interest rate" refers to the actual interest rate giving the amount by which a number of shillings owed by a borrower to a lender grows over time; the term "real interest rate" refers to the amount by which the purchasing power of those shillings grows over time—that is, the real interest rate is the nominal interest rate adjusted for the effect of inflation on the purchasing power of the loan proceeds. The relation between the nominal and real rates is given by the Fisher equation, which is This states that the real interest rate () equals the nominal interest rate () minus the expected inflation rate (). Here all the rates are continuously compounded. For rates based on simple interest, the Fisher equation takes the form where  is the simple nominal interest rate and  is the simple real interest rate; this equation is well approximated by using the simple rates in the previous equation provided all three percentage rates are relatively small. If the real rate  is assumed, as per the Fisher hypothesis, to be constant, the nominal rate  must change point-for-point when  rises or falls. Thus, the Fisher effect states that there will be a one-for-one adjustment of the nominal...

Words: 1834 - Pages: 8

Premium Essay

Fin Week3 Quiz

...Week 3: Risk, Return and Bond Valuation – Self Quiz 1. Which of the following bonds would have the greatest percentage increase in value if all interest rates fell by 1%? 10-year, zero coupon bond 20-year, 10% coupon bond 20-year, 5% coupon bond 1-year, 10% coupon bond ***20-year, zero coupon bond 2. Which of the following statements is most correct? Characteristic line is another name for the security market line. The characteristic line is the regression line that results from plotting the returns on a particular stock versus the returns on a stock from a different industry. The slope of the characteristic line is the stock's standard deviation. The distance of the plot points from the characteristic line is a measure of the stock's market risk. *** The distance of the plot points from the characteristic line is a measure of the stock's diversifiable risk. 3. Which of the following statements is most correct? E A. Tests have shown that the betas of individual stocks are unstable over time, but that the betas of large portfolios are reasonably stable over time. B. Richard Roll has argued that it is not even possible to test the CAPM to see if it is correct. C. Tests have shown that the risk/return relationship appears to be linear, but the slope of the relationship is less than that predicted by the CAPM. D. Statements A and B are correct...

Words: 424 - Pages: 2

Free Essay

Banking Sector Refo

...enclosed( on a good quality A-4 size bond paper of 80 GSM using one side only) from eligible Indian Nationals for the Common Preliminary Examination for following posts of Non Technical Popular Category(Graduate), Assistant Station Master and Traffic Assistant. Applications complete in all respects along with required enclosures should be sent by ORDINARY POST NORMALLY to the concerned Railway Recruitment Board as mentioned in para 15 of this notification, so as to reach on or before 11.06.2012 up to 17.30 Hrs. The applications can also be dropped in the box kept at the premises of concerned RRB offices, till the closing date. For candidates residing in Assam, Meghalaya, Manipur, Arunachal Pradesh, Mizoram, Nagaland, Tripura, Sikkim, Jammu & Kashmir, Lahaul & Spiti districts and Pangi sub-division of Chamba district of Himachal Pradesh, Andaman, Nicobar and Lakshwadeep islands and for candidates residing abroad, the closing date for receipt of applications by posts will be 26.06.2012 up to 17.30 Hrs. Candidates Please Note: 1) Stages of Exam. :a) Common Preliminary Examination (i.e. stage I) for all the notified categories. b) Main (Second stage) Exam for Cat No. 1&2 - followed by Verification of documents. c) Main (Second stage) Exam for Cat No. 3&4 – followed by verification of documents. d) Main (Second stage) Exam for Cat. No. 5&6, qualifying typing test followed by Verification of documents. e) Main (Second stage) Exam for Cat No.7&8, aptitude test followed by Verification of documents...

Words: 11122 - Pages: 45

Free Essay

The Economic Function of Credit Rating Agencies

...MGT-435B Bond Markets – Final Project Report: The Economic Function of Credit Rating Agencies - What does the Watchlist tell us? Christina E. Bannier, Christian W. Hirsch (2010) Executive Summary In the “Economic Function of Credit Rating Agencies” by Christina Bannier and Christian Hirsch (2010), the authors researched whether the economic role of credit rating agencies have been enhanced after the introduction of Watchlists. Therefore, the focus of this paper is to analyze the shift in function of credit rating agencies from a passive player providing creditworthiness certification to a more active credit monitoring entity. First, the paper examines if the Watchlist instrument changes the informational content of credit ratings. Next, the paper tested between two different explanatory lines regarding the function of the rating agencies by analyzing their use of the Watchlist as delivering information to market participants and creating an implicit contract to influence a firm’s risk choices via the threat of a credit downgrade. They find that the general market reaction to downgrades is stronger in the post-Watchlist period, which is consistent with previous research conclusions. These results hence indicate that the informational content of rating downgrades has strongly risen after the introduction of Watchlist. Additionally, the authors find that direct rating downgrades trigger a much stronger market reaction than watch-preceded downgrades. These findings support...

Words: 2561 - Pages: 11

Free Essay

Credit Risk Model

...Models . . . . . . . . . . 1.2.1 The Black and Cox’s Model . . 1.2.2 Longstaff and Schwartz’s Model 1.2.3 Leland and Toft’s Model . . . . 1.2.4 Zhou’s Model . . . . . . . . . . 1.2.5 Random Threshold Model . . . 2 5 5 11 11 15 19 24 30 35 36 39 41 45 48 50 51 56 67 76 77 79 79 82 83 84 94 114 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Modelli reduced form 2.1 Approach With An Homogenous Poisson Process . . 2.2 Approach With a Non-Homogenous Poisson Process 2.3 Approach with a Cox’s Process . . . . . . . . . . . . 2.4 Bond and Spread Valuation . . . . . . . . . . . . . . Models For The Correlation Between Defaults 3.1 Bottom-Up Models . . . . . . . . . . . . . 3.1.1 Structural Apporach . . . . . . . . 3.1.2 Intensity Models Approaches . . . 3.1.3 Approaches with Copulas . . . . . 3.2 Top-Down Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Credit Risk Derivates 4.1 The Credit Default Swaps ....

Words: 33386 - Pages: 134

Premium Essay

Corporation Finance Final Exam

...TEST NUMBER: ________________ FI 3300 – CORPORATION FINANCE FINAL EXAM Summer 2008 NAME _____________________________________________ STUDENT NUMBER _________________________________ CLASS DAYS/TIME _______________ INSTRUCTOR _________________________ READ THE FOLLOWING DIRECTIONS VERY CAREFULLY. FAILURE TO FOLLOW THESE INSTRUCTIONS WILL ALMOST CERTAINLY RESULT IN YOUR EXAM BEING MISGRADED WHICH WILL ADVERSELY AFFECT YOUR GRADE. IF THERE IS ANYTHING ABOUT THE DIRECTIONS THAT YOU DO NOT UNDERSTAND, ASK YOUR INSTRUCTOR IMMEDIATELY. 1. Fill in your name, student number, and the days and time of the class for which you are registered (for example, T/TH at 5:00pm) on the Answer Sheet as well as on the lines above. 2. In the box on the Answer sheet titled “TEST NUMBER” record the number that appears in the upper right hand corner of this sheet on the line “TEST NUMBER” – since there are multiple versions of the exam, failure to do so may result in your exam being graded with the wrong answer key!!! DO NOT COPY FROM SOMEONE ELSE’S EXAM – YOUR NEIGHBOR MAY HAVE A DIFFERENT VERSION OF THE EXAM!!! 3. Read each question very carefully. Consider all of the answer choices and then select the best correct answer – there is only one best answer per question. Circle the letter answer on the exam and record your answers on the Answer Sheet. NOTE WELL: ONLY THE ANSWER KEY WILL BE GRADED!!! 4. You may use a financial calculator. No notes, formula sheets, scratch...

Words: 2652 - Pages: 11