Because a bond is a legal contract, what could happen if a borrower fails to meet their obligation?

ANSWER:
Because a bond is a legal contract, what could happen if a borrower fails to meet their obligation?

Answer

d) The borrower could face bankruptcy proceedings

 

Explanation

 

In the legal contract of a bond, both issuer(borrower) and lender (investor) are bound by the agreement and payment of their obligations.

So if a borrower fails to meet their obligation respect to payment of interest or yield to maturity. Defaults usually happen when deteriorating business conditions have lead to a reduction in revenues adequate to make scheduled repayments impossible.

 

A business that has too little working capital can take what action?

 

Answer

 

a) short-term financing

 

Explanation-

 

Short term finance pertains to financing needs for a small period generally less than a year. In businesses, it is also known as working capital financing.

Some of the Major sources to satisfy the requirements of Short-Term Working Capital are- (a) Borrowings from Banks (b) Trade credit (c) Installment credit (d) Consumer Credit or Customer Advances and (e) Accounts Receivable Financing!

 

If Company A has a lower TIE ratio than Company B, then Company A has __________ than Company B.

 

Answer

 

d) poorer interest coverage

 

Explanation-

 

The formula to find a company's TIE ratio is dividing earnings before interest and taxes (EBIT) by the total interest payable on bonds and other debt.

 

A lower ratio of TIE implies that a company has a higher chance of defaulting, and has less money accessible to devote to debt repayment.

 

What is the amount of money foregone by investing in one asset compared to another known as?

 

Answer

 

d) The opportunity cost of capital

 

Explanation

 

In econometrics, the opportunity cost of capital is the cumulative return on investment that a business foregoes when it selects to use funds for a specific project, rather than investing in any other one.

 

What principle of corporate governance requires public clarification of the roles and responsibilities of board and management in order to provide stakeholders with a level of accountability?

 

Answer

 

c) Disclosure and transparency

 

Through transparency the stakeholders are aware about the internal process and accounting of the organisation.

 

Which of the following is true for calculating the future value of multiple cash flows?

 

Answer-

 

a) If the cash flows aren't uniform, you must find the FV of each cash flow and then add them together.

 

Explanation

 

If the cash flows are not uniform and don't occur at fixed intervals. Also earn different interest rates, than the only feasible way to find the future value is to do calculate the FV of each cash flow and then add them together.

 

Marty receives a tip that the price of shares of an oil company are about to fall significantly. In order to avoid a huge loss, he goes into his online brokerage account and sells all of the stock that he owns in the oil company.

 

What type of market transaction is taking place?

 

Answer

 

a) Secondary market offering

Explanation-

A secondary market offering, , is a registered offering of a large stock or security that has been issued to the public earlier in the form of IPO. IPO is primary market offering.