section 9

Question 1

bond indenture

Answer 1

the written contract that spells out the legal terms and conditions of the obligations of the bond issuer and the rights of the bond holders

Question 2

debentures

Answer 2

unsecured bonds

Question 3

secured or mortgage-backed bonds

Answer 3

bonds for which property or real estate are specified as collateral

Question 4

junk bonds

Answer 4

unsecured bonds issued by companies with low credit ratings

Question 5

senior or subordinated bonds

Answer 5

typically unsecured bonds that are designated as having priority or subordinated rights to other unsecured creditors

Question 6

term bonds

Answer 6

bonds that require principal repayment in full at maturity

Question 7

serial bonds

Answer 7

bonds that require principal repayment periodically throughout the term of the bond

Question 8

convertible bonds

Answer 8

bonds which may be converted to other securities, such as stock, after a specified period of time, at the option of the bond holder

Question 9

callable bonds

Answer 9

bonds which can be paid off prior to maturity at the option of the company issuing the bonds

Question 10

bonds issued at a premium or a discount

Answer 10

bonds which are issued for cash in an amount greater or less than the face amount or principal of the note

Question 11

bond exchange

Answer 11

a market where bond holders may sell their bonds to other investors

Question 12

preferred stock is

Answer 12

1. usually non voting
2. limited in the sharing of dividend distributions
3. reflected as owners equity on the balance sheet

Question 13

preferred stock benefits

Answer 13

1. dividend limitations, but dividend preferences over common stockholders
2. preferences in the distribution of assets in the event of business termination
3. some tax benefits to corporate investors

Question 14

What is the correct chronological sequence of dividend related dates?

Answer 14

declaration date
record date
payment date

Question 15

Dividends are recorded as a liability only

Answer 15

when declared by the board of directors

Question 16

bonds are issued by a company

Answer 16

to borrow funds from financial markets

Question 17

t/f serial bonds are bonds that require periodic interest and principal payments over the term of the bonds

Answer 17

true

Question 18

par value is

Answer 18

a nominal per share amount established by a corporation’s founders under requirements established by the state in which incorporation takes place

Question 19

Where is the amount of dividends in arrears typically disclosed?

Answer 19

in the footnotes to the financial statements

Question 20

the issuance of Preferred Stock at a price above par value would result in TOTAL capital contributions reflected on the balance sheet equal to the number of share issued times the

Answer 20

issuance price. TOTAL contributions equal par value PLUS contributed paid in capital in excess of par

Question 21

dividends in arrears on Preferred Stock are recorded as liability

Answer 21

on the date dividends are DECLARED sufficient to pay the arrears