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1.

An advantage of issuing a bond relative to stock is that the bond interest payments are tax deductible. True False

2.

Issuing bonds dilutes the voting power of the common shareholders because bonds have preferential voting rights. True False

3.

The major disadvantages of issuing a bond are the risk of bankruptcy and the negative impact on cash flow because debt must be repaid at a specified date in the future. True False

4.

A bond's interest payments are determined by multiplying the bond's principal amount by the stated interest rate. True False

5.

A convertible bond can be called for early retirement at the option of the issuing company. True False

6.

The issuing company and the bond underwriter determine the selling price of a bond. True False

7.

The issuance price of a bond is the present value of both the principal plus the cash interest to be received over the life of the bond discounted by the stated (coupon) rate. True False

8.

When the market rate of interest is greater than the stated interest rate, the bond will sell at a discount. True False

9.

A bond will sell for a premium when the market rate of interest is greater than the stated rate of interest. True False

10. The proceeds received from a bond issue will be greater than the bond maturity value when the stated interest rate exceeds the market rate of interest. True False

11. Increases in the market rate of interest subsequent to a bond issue increase the discount on the bond. True False

12. A bond will sell at its par value when the market rate of interest equals the stated rate of interest. True False

13. A company has a December 31 fiscal year-end. If the interest is paid annually on December 31, the bond interest expense on the income...

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