Required: Circle the correct answer for each question Which elements of bonds ar

Question

Required: Circle the correct answer for each question Which elements of bonds are pre printed on the bond certificate and therefore are non Stated Interest rate, face value payment terms maturity date, purchase price Effective interest rate, payment terms, maturity date Stated interest rate, face value, payment terms, maturity date All elements are negotiable If an investor wants a determined end result, will he or she invest in bonds or in stocks? Stocks Bonds In a liquidation, who has higher rights to the corporation's assets: stockholders or bondholder Stockholders Bondholders Stockholders and bondholders have equal rights When bonds are issued, which Statement of Cash Flows activity is affected? Operating Investing Financing When bond interest is paid which statement of Cash Flows activity is affected? Operating Investing Financing When bonds are issued, does the quick ratio increase or decrease? Increase Decrease No effect

Explanation / Answer

1.

Bond Certificate is a document which is provided by the bond issuing company to the

investor as an evidence of its debt. Bond certificate contains all the information like bond

issuer’s name, interest rate, bond face amount and maturity date.

All the elements printed on the Bond certificates are negotiable.

2.

He or she should invest in Bonds if he or she wants a determined end result.

3.

Stockholders have rights in the corporation assets during liquidation.

4.

Financing activity is affected when bonds are issued.

5.

When bond interest is paid Operating activity is affected.

6.

Quick ratio will increase as the cash will increase when bonds are issued.

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