FIN /
320f -
/ // /
Exam 1 Questions With Correct Answers
/ // // // // //
issuing //debt //- //correct //answer(s) //✔✔ //when //companies //borrow //money
issuing //equity //- //correct //answer(s) //✔✔ //when //companies //sell //something //they //own, //above
//and //beyond //their //regular //product //or //service; //that //is, //sell //part //of //the //company
Debt /
/Instruments //- /
/correct //answer(s) //✔✔ //Bonds, //Loans, //Treasury //bills, //commercial //paper, //etc.
Equity //Instruments //- //correct //answer(s) //✔✔ //Common //Stock, //Preferred //Stock
Federal //Government //Debt //- //correct //answer(s) //✔✔ //U.S. //Treasury //bills //(short-
term), //notes //and //bonds //(long-term)
Revenue-
generating /
/bonds //- /
/correct /
/answer(s) //✔✔ //repaid //with //revenue //generated //by //the //project //that //the //bond //financed
General //obligation //bonds //- //correct //answer(s) //✔✔ //repaid //with //property //tax //dollars
, Corporate //Debt //- //correct //answer(s) //✔✔ //Corporate //bonds, //commercial //paper, //term //loans,
//etc.
Principal //- //correct //answer(s) //✔✔ //- //the //amount //to //be //repaid
- //also //called //the //par/face/maturity //value
Interest //- //correct //answer(s) //✔✔ //- //The //cost //of //borrowing //money
- //With //bonds, //called //"coupon" //rate
- //With //T-bills, //called //both //the //discount //rate //and //risk-free //rate
Maturity //date //- //correct //answer(s) //✔✔ //when //principal //is //due
To /
/subordinate //a //debt //- //correct //answer(s) //✔✔ //to //place //it //further //back //in //the //priority //line
Mortgage //bonds //- //correct //answer(s) //✔✔ //- //secured //with //collateral
- //lower //coupon //rate //(b/c //less //risk //aka //less //return)
Debenture //bonds //- //correct //answer(s) //✔✔ //- //unsecured; //has //no //collateral //backing //it //up
-/
/higher /
/coupon //rate //(b/c //investors //will //demand //higher //rate //of //return //for //riskier //investment)
Bond /
/indenture //- //correct //answer(s) //✔✔ //the //contract //between //borrower //and //lender; //identifies
//terms/conditions /
/of /
/loans /
/as //well //as //any //restrictive //covenants //(ex: //call //provisions, //sinking //fund //requirement)
320f -
/ // /
Exam 1 Questions With Correct Answers
/ // // // // //
issuing //debt //- //correct //answer(s) //✔✔ //when //companies //borrow //money
issuing //equity //- //correct //answer(s) //✔✔ //when //companies //sell //something //they //own, //above
//and //beyond //their //regular //product //or //service; //that //is, //sell //part //of //the //company
Debt /
/Instruments //- /
/correct //answer(s) //✔✔ //Bonds, //Loans, //Treasury //bills, //commercial //paper, //etc.
Equity //Instruments //- //correct //answer(s) //✔✔ //Common //Stock, //Preferred //Stock
Federal //Government //Debt //- //correct //answer(s) //✔✔ //U.S. //Treasury //bills //(short-
term), //notes //and //bonds //(long-term)
Revenue-
generating /
/bonds //- /
/correct /
/answer(s) //✔✔ //repaid //with //revenue //generated //by //the //project //that //the //bond //financed
General //obligation //bonds //- //correct //answer(s) //✔✔ //repaid //with //property //tax //dollars
, Corporate //Debt //- //correct //answer(s) //✔✔ //Corporate //bonds, //commercial //paper, //term //loans,
//etc.
Principal //- //correct //answer(s) //✔✔ //- //the //amount //to //be //repaid
- //also //called //the //par/face/maturity //value
Interest //- //correct //answer(s) //✔✔ //- //The //cost //of //borrowing //money
- //With //bonds, //called //"coupon" //rate
- //With //T-bills, //called //both //the //discount //rate //and //risk-free //rate
Maturity //date //- //correct //answer(s) //✔✔ //when //principal //is //due
To /
/subordinate //a //debt //- //correct //answer(s) //✔✔ //to //place //it //further //back //in //the //priority //line
Mortgage //bonds //- //correct //answer(s) //✔✔ //- //secured //with //collateral
- //lower //coupon //rate //(b/c //less //risk //aka //less //return)
Debenture //bonds //- //correct //answer(s) //✔✔ //- //unsecured; //has //no //collateral //backing //it //up
-/
/higher /
/coupon //rate //(b/c //investors //will //demand //higher //rate //of //return //for //riskier //investment)
Bond /
/indenture //- //correct //answer(s) //✔✔ //the //contract //between //borrower //and //lender; //identifies
//terms/conditions /
/of /
/loans /
/as //well //as //any //restrictive //covenants //(ex: //call //provisions, //sinking //fund //requirement)
