Chapter 12: Long Term External Finance

10 Questions | Total Attempts: 22

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Chapter 12: Long Term External Finance

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Questions and Answers
  • 1. 
    In order for firms issuing convertible notes to claim tax deductions on interest payments, which of the following conditions must be met
    • A. 

      The interest rate is fixed 

    • B. 

      Total funds raised from the issue of convertible notes must not exceed $500 million

    • C. 

      Conversion must take place two and ten years from the date of issue without exception

    • D. 

      Issuers decide when to convert notes to ordinary shares

  • 2. 
    Hybrid securities are equity securities which act like debt
    • A. 

      True

    • B. 

      False

  • 3. 
    Which of the following is not a potential benefit of leasing
    • A. 

      Taxation benefits

    • B. 

       Increased turnover 

    • C. 

      Speed in acquisition of assets

    • D. 

      Avoidance of obsolescence

  • 4. 
    Which of the following statements is false
    • A. 

      Corporate bonds always pay semi annual coupons 

    • B. 

      The face value on corporate bonds is repaid when the bonds mature

    • C. 

      Corporate bonds are debt instruments

    • D. 

      The issuer of corporate bonds receives the face value of the bonds at issue

  • 5. 
    A person who applies for and buys shares issued under a prospectus and sells them on the first day of trade on the market for a profit is a
    • A. 

      Bear

    • B. 

      Bull

    • C. 

       stag 

    • D. 

      Dead cat

  • 6. 
    Which of the following statements is true
    • A. 

      Subordinated debt ranks above ordinary shareholders in the event of liquidation 

    • B. 

      Subordinated debt ranks above other similar classes of debt in the event that a firm is liquidated

    • C. 

      All of the above

    • D. 

      Unsubordinated debt takes a lower ranking than other debt of similar characteristics

  • 7. 
    An initial public offer (IPO) is the first issue of capital made to the public
    • A. 

      True

    • B. 

      False

  • 8. 
    Preference shares are best described as hybrid debt instruments
    • A. 

      True

    • B. 

      False

  • 9. 
    Eurobonds are debt securities that are issued
    • A. 

      Outside the domestic capital markets of the issuer in a currency that is the domestic currency of the place of issue

    • B. 

      Outside the domestic capital markets of the issuer in a currency that is neither the domestic currency of the issuer nor the domestic currency of the place of issue 

    • C. 

      Outside the domestic capital markets of the issuer in a currency that is the domestic currency of the issuer

    • D. 

      Inside the domestic capital markets of the issuer in a currency that is neither the domestic currency of the issuer nor the domestic currency of the place of issue

  • 10. 
    An option is an obligation to undertake a trade by a given date at a given price
    • A. 

      True

    • B. 

      False

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