80.2K

Verified Solution

Link Copied!

$1.$ Which of the following is not a common restrictive covenant included in bond indentures to reduce risk to the investor?

a$.$ Restrictions on increases in executive salaries

b$.$ Restrictions on additional borrowing activities

c$.$ Requirements that the names and addresses of the bondholders be registered with the bond issuer

d$.$ Limitations on the payment of dividends

$2.$ Which of the following statements is true regarding the straight$-$line method of amortizing discounts and premiums on bonds?

a$.$ It assigns variable amounts of interest over the term of the liability.

b$.$ It uses compound interest principles.

c$.$ It assigns the same amount of interest to each interest period over the life of the bond.

d$.$ It accurately reports the amount of interest expense incurred during each interest period.

$3.$ The times$-$interest$-$earned ratio is calculated by which of the following?

a$)$ Total assets divided by interest expense.

b$)$ Net income divided by interest expense.

c$)$ Earnings before interest and taxes divided by interest expense.

d$)$ None of these answer choices are correct.

$4.$ Which of the following correctly describes an installment note?

Multiple Choice

a$)$ An installment note requires equal interest payments with the entire principal balance paid at maturity.

b$)$ An installment note requires equal payments of interest and principal in which the amount of interest decreases over the life of the note.

c$)$ An installment note requires equal payments of interest and principal in which the amount of interest increases over the life of the note.

d$)$ The installment note requires decreasing payments of interest and principal in which the amount of interest remains constant over the life of the note.

$5.$ A restrictive covenant may

a$)$ restrict additional borrowing.

b$)$ limit dividend payments.

c$)$ restrict salary increases.

d$)$ All of these choices are common covenant restrictions.

Answer & Explanation Solved by verified expert

See Answer