6. 45. A company has many choices in ways it finances the purchase of its long-t

Question

6. 45. A company has many choices in ways it finances the purchase of its long-term assets, which of these choices is not advisable: a. Selling of its shares b. Selling of bonds for over 10 years. c. Selling part of its short-term investments d. Using short-term financing by a merchant bank e. All are advisable 46. T, F. A bond is a long-term debt instrument that has some serious drawbacks especially fixed annual payments and restrictions on borrowing from other lenders. 47. T, F. Bonds have specific maturity date which must be honored by the lender. 48, T. F. A $100,000 bond that has 6 % coupon rate of interest and 5% effective market rate of 49, T, F, A $100,000 bonds that have 5% coupon rate and 6 % effective market rate must be sold at 50, T, F. A seller of $100,000 bonds that have 5% coupon rate and 6% effective interest rate must be interest must be sold at a premium. par making annual payments to the bondholder of $5,000.00.

Explanation / Answer

45) Option (D) Using short term financing by a merchant bank

46) True

47) True

48) True

49) False ( sold at discount)

50) True ( 100,000 X 5%)

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