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Homework answers / question archive / Because a bond is a legal contract, what could happen if a borrower fails to meet their obligation? a) The bond could be reevaluated by a rating agency

Because a bond is a legal contract, what could happen if a borrower fails to meet their obligation? a) The bond could be reevaluated by a rating agency

Finance

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

  • a) The bond could be reevaluated by a rating agency.
  • b) The lender could then own the bond outright.
  • c) The borrower could be required to prepare an offering memorandum.
  • d) The borrower could face bankruptcy proceedings.

 

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

  • a) short-term financing
  • b) Reduce credit to consumers
  • c) Increase inventory
  • d) Reduce cash on hand

 

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

  • a) less likelihood of using cash on hand to meet its interest obligations
  • b) less long-term debt
  • c) a higher EBIT
  • d) poorer interest coverage

 

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

  • a) The weighted average cost of capital
  • b) The required rate of return on capital
  • c) The overall cost of capital
  • d) The opportunity cost of capital

 

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?

  • a) Interests of other stakeholders
  • b) Shareholder rights
  • c) Disclosure and transparency
  • d) Integrity and ethical behavior

 

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

  • a) If the cash flows aren't uniform, you must find the FV of each cash flow and then add them together.
  • b) It is more complex to find the FV of annuities than the FV of irregular cash flows.
  • c) You can only find the FV of multiple cash flows if they all have the same interest rate.
  • d) To find the FV of multiple annuities, multiply the sum of all the present values by the interest rate plus time period.

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?

  • a) Secondary market offering
  • b) Share buyback
  • c) Private placement
  • d) Primary market offering

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