WGU D362 Corporate Finance Mid Term
Exam 2 Review Questions and Answers
100% Pass | Graded A+
David Mungai [Date] [Course title]
, WGU D362 Corporate Finance Mid Term
Exam 2 Review Questions and Answers
100% Pass | Graded A+
ABC Corporation has declared a rights offering to stockholders of
record on Friday, December 10th. Under the offer, shareholders
need 10 rights to subscribe to 1 new share at a price of $19.
Fractional shares can be rounded up to purchase 1 full share. As
of the ex date, the stock is trading at $24. The value of the right is:
A. $.45
B. $.50
C. $.55
D. $1.00 - Answer>> $24 - $19/10 = $5/10 = $.50 Value "Ex
Rights"
Notice that the market price of $24 was already adjusted on the
ex date by the exchange where the stock trades. Do not try and
reduce the price again!
The trust indenture of a bond would include which of the following
information?
I Interest rate
II Maturity
III Collateral backing the issue
IV Call provisions - Answer>> The best answer is D.
A corporate bond is issued under a bond contract. The contract
spells out the interest rate, maturity, collateral, call or put
provisions, and all other relevant features of the bonds. To ensure
that these covenants are followed, a trustee is appointed to
monitor the issuer's compliance with all of these promises. This
document is the trust indenture.
The term "Funded Debt" refers to which of the following issues?
, A. Commercial paper with under 270 days to maturity
B. Revenue bond with at least 5 years to maturity
C. Corporate debt with at least 5 years to maturity
D. Treasury bond with at least 5 years to maturity - Answer>>
The best answer is C.
The term "funded debt" refers to CORPORATE debt that is
considered part of a company's permanent long term funding.
Included is all long term corporate debt. Revenue bonds are
issued by municipalities and T-Bonds are issued by the
Government. Commercial paper is a short term financing and is
an "unfunded" debt.
All of the following statements are true regarding a bond that is
"registered to principal only" EXCEPT:
A. the bond is negotiable
B. interest coupons are detached from the corpus of the bond
C. interest payments can be redeemed by anyone
D. at maturity, the registered owner receives the face amount of
the bond - Answer>> The best answer is B.
A registered to principal only bond has a physical certificate with
the bond's face amount registered in the owner's name, but
interest coupons are attached which are payable to the "bearer."
Bearer coupons can be redeemed by anyone. The bonds are
negotiable. No new issues have been sold in the U.S. since 1983
- after this point only fully registered or book entry bonds have
been issued. However, these bonds still trade in the market (at
least until 2023, if the bond had 40 years to maturity).
Which of the following statements are TRUE regarding the
settlement of trades in U.S. Government bonds?
I Trades settle next business day
II Trades settle 3 business days after trade date
III Trades settle in Clearing House Funds
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