GBA334 Final Exam Latest 2018 Question Question 1 Given an activity's optimistic, most likely, and pessimistic time estimates of 4, 12, and 18 days respectively, what is the PERT variance for this activity? Question 1 options: 2.33 5.44 64.00 8.00 None of the above Question 2 Given the following small project, the critical path is __________ days. Question 2 options: none of the above 14 10 20 16 Question 3 The expected time in PERT is: Question 3 options: the square root of the sum of the variances of the activities on the critical path. none of the above. a weighted average of the most optimistic time, most pessimistic time, and four times the most likely time. the modal time of a beta distribution. a simple average of the most optimistic, most likely, and most pessimistic times. Question 4 The expected time in PERT is: Question 4 options: greater than the most likely time. less than the most likely time. equal to the most likely time. any of the above. none of the above. Question 5 An automatic car wash is an example of a constant service time model. Question 5 options: True False Question 6 An airline company tracks the number of lost bags that occur each day. This is best monitored by which of the following control charts? Question 6 options: p-chart c-chart x-bar chart R-chart None of the above Question 7 The c-chart is useful when we: Question 7 options: take a number of measurements and compute the average. find the fraction of the production lot defective. find the number of defective items in a production lot. None of the above is correct. take a number of measurements and compute the ranges. Question 8 At a local fast-food joint, cars arrive randomly at a rate of 12 every 30 minutes. The fast food joint takes an average of 2 minutes to serve each arrival. What is the utilization factor for this system? Question 8 options: 0.547 0.467 0.800 0.133 None of the above Question 9 Both transportation and assignment problems are members of a category of LP techniques called __________. Question 9 options: Hungarian problems source-destination problems supply and demand problems network flow problems transshipment problems Question 10 A certain firm has four different operations that must be assigned to four locations. The profit (in thousands of dollars) associated with each operation at each location is presented below. The firm's vice president would like to assign the various operations so that the total profit is maximized. Find the appropriate assignments. Operation Location 1 2 3 4 W 9 11 7 10 X 10 12 6 12 Y 8 10 13 9 Z 12 8 11 10 Using the data in the table, what is the optimal location for Operation X? Question 10 options: 4 3 1 2 Previous PageNext Page Question 11 If items being transported must go through an intermediate point before reaching a final destination, then this situation is known as a(n) __________. Question 11 options: transportation problem transshipment problem intermediate point problem assignment problem None of the above Question 12 A technique that allows a researcher to determine the greatest amount of material that can move through a network is called __________. Question 12 options: maximal-flow shortest-route maximal-tree maximal-spanning Question 13 In the maximal-flow technique, a zero (0) means no flow or a one-way arc. Question 13 options: True False Question 14 Which of the following distributions is most often used to estimate the arrival pattern? Question 14 options: Erlang Beta Normal Negative exponential Poisson Question 15 To guarantee that cans of soup are properly filled, some cans are sampled and the amounts measured. The overall average for the samples is 12 ounces. Each sample contains 10 cans. The average range is 0.4 ounces. Using the data in the table above, what is the lower control chart limit for the sample averages? Question 15 options: 12.1232 11.8768 12.308 13.2 None of the above Question 16 Which of the following is not a property of linear programs? Question 16 options: Objective function and constraints are linear One or more constraints One objective function At least two separate feasible regions Alternative courses of action Question 17 Assume that we are using a waiting line model to analyze the number of service technicians required to maintain machines in a factory. Our goal should be to: Question 17 options: minimize the percent of idle time of the technicians. maximize productivity of the technicians. minimize the total cost (cost of maintenance plus cost of downtime). minimize the number of machines needing repair. minimize the downtime for individual machines. Question 18 What type of problems use LP to decide how much of each product to make, given a series of resource restrictions? Question 18 options: Product restriction Product mix Resource restriction Resource allocation Resource mix Question 19 A feasible solution to a linear programming problem: Question 19 options: must satisfy all of the problem's constraints simultaneously. must give the maximum possible profit. need not satisfy all of the constraints, only the non-negativity constraints. must be a corner point of the feasible region. must give the minimum possible cost. Question 20 Given the table below, the final table for an assignment problem, who should be assigned to Job 2? Job (Time in Minutes) 1 2 3 4 Worker A 0 0 2 1 B 1 3 1 0 C 1 0 1 1 D 0 1 0 3 Question 20 options: Worker C Worker A Worker D Either worker A or worker C Neither worker A nor worker C Question 21 The following table represents a project with four activities. All times are in weeks. The following represents a project with four a activities. All times are in weeks Activity Immediate Predecessor Optimistic time Most likely time Pessimistic time A - 2 8 17 B - 8 8 8 C A 6 9 18 D B 5 11 17 Using the data in the table, what is the minimal expected completion tiime (in weeks) for the project? Question 21 options: None of the above 11 19 18 37 Question 22 Bank Boston has a branch at Bryant College. The branch is busiest at the beginning of the college year when freshmen and transfer students open accounts. This year, freshmen arrived at the office at a rate of 40 per day (assume 8-hour days). On average, it takes the Bank Boston staff person about ten minutes to process each account application. The bank is considering having one or two tellers. Each teller is paid $12 per hour and the cost of waiting in line is assumed to be $8 per hour. What is the total daily service cost for the two-teller model? Question 22 options: $48 $192 $96 $144 Question 23 The R-chart is useful when we: Question 23 options: take a number of measurements and compute the ranges. find the number of defective items in a production lot. None of the above is correct. find the fraction of the production lot defective. take a number of measurements and compute the average. Question 24 The average range of a process for packaging cereal is 1.1 ounces. Assume the sample size is 10. Using the data in the table above, what is the lower control chart limit for the sample ranges? Sample Size Mean Factor Upper Range Lower Range n A2 D4 D3 2 1.880 3.638 0 3 1.023 2.574 0 4 0.729 2.282 0 5 0.577 2.114 0 6 0.483 2.004 0 7 0.419 1.924 0.076 8 0.373 1.864 0.136 9 0.337 1.816 0.184 10 0.308 1.777 0.223 12 0.266 1.716 0.284 Question 24 options: 0.223 1.777 0.245 1.955 None of the above Question 25 Customers enter the waiting line to pay for food as they leave a cafeteria on a first-come, first-served basis. The arrival rate follows a Poisson distribution, while service times follow an exponential distribution. If the average number of arrivals is four per minute and the average service rate of a single server is seven per minute, on average, how much time will elapse from the time a customer enters the line until he/she leaves the cafeteria? Question 25 options: 1.33 minutes 0.33 minute 0.67 minute 0.75 minute 0.50 minute Question 26 Cars arrive at a local JLUBE franchise at the rate of 1 every 12 minutes. Service times are exponentially distributed with an average of 15 minutes. Jack Burns, the JLUBE owner, has decided to open a second work bay, i.e., make the shop into a two-channel system. Under this new scheme, the total time an average customer spends in the system will be Question 26 options: 33.3 minutes. 24.6 minutes. 9.6 minutes. 2.1 minutes. 37 minutes. Question 27 To guarantee that cans of soup are properly filled, some cans are sampled and the amounts measured. The overall average for the samples is 12 ounces. Each sample contains 10 cans. The average range is 0.4 ounces. Using the data in the table above, what is the upper control chart limit for the sample averages? Question 27 options: None of the above 11.8768 12.1232 12.308 13.2 Question 28 Bank Boston has a branch at Bryant College. The branch is busiest at the beginning of the college year when freshmen and transfer students open accounts. This year, freshmen arrived at the office at a rate of 40 per day (assume 8-hour days). On average, it takes the Bank Boston staff person about ten minutes to process each account application. The bank is considering having one or two tellers. Each teller is paid $12 per hour and the cost of waiting in line is assumed to be $8 per hour. What is the total daily service cost for the single teller model? Question 28 options: $144 $192 $96 $48 Question 29 The p-chart is useful when we: Question 29 options: find the fraction of the production lot defective. take a number of measurements and compute the average. take a number of measurements and compute the ranges. find the number of defective items in a production lot. None of the above is correct. Question 30 A constraint with zero slack or surplus is called a __________ Question 30 options: linear constraint binding constraint nonlinear constraint resource constraint nonbinding constraint Question 31 Bags of chocolate candy are sampled to ensure proper weight. The overall average for the samples is 36 ounces. Each sample contains twelve bags. The average range is 1.3 ounces. Sample Size n Mean Factor A2 Upper Range D2 Lower Range D3 2 1.880 3.628 0 3 1.023 2.574 0 4 0.729 2.282 0 5 0.577 2.114 0 6 0.483 2.004 0 7 0.419 1.924 0.076 8 0.373 1.864 0.136 9 0.337 1.816 0.184 10 0.308 1.777 0.223 12 0.266 1.716 0.284 Using the data in the table above, what is the lower control chart limit for the sample averages? Question 31 options: 36.4849 35.6270 35.5150 36.3730 Question 32 Lines connecting nodes on a network are called links. Question 32 options: True False Question 33 If the total supply from the sources does not equal the total demand from the destinations in the transportation problem: Question 33 options: the amount put in a dummy source or destination should make supply and demand equal. and if supply is greater than demand, add a dummy source or factory. and if demand is greater than supply, add a dummy destination or warehouse. none of the above. all of the above. Question 34 Use table below to answer question The following represents a project with known activity times. All times are in weeks. Activity Immediate Predecessor Time A - 4 B - 3 C 2 D A 7 E B 4 F C, D 5 G B 4 The following table represents a project with known activity times. All times are in weeks. Using the data in the table, what is the slack time (in weeks) for activity D? Question 34 options: 0 5 3 6 None of the above Question 35 Bank Boston has a branch at Bryant College. The branch is busiest at the beginning of the college year when freshmen and transfer students open accounts. This year, freshmen arrived at the office at a rate of 40 per day (assume 8-hour days). On average, it takes the Bank Boston staff person about ten minutes to process each account application. The bank is considering having one or two tellers. Each teller is paid $12 per hour and the cost of waiting in line is assumed to be $8 per hour. What is the proportion of time that the staffers are busy? Question 35 options: .833 .333 .667 .725 Question 36 When using a general LP model for transportation problems, if there are 4 sources and 3 destinations, which of the following statements is true? Question 36 options: There are typically 12 decision variables and 7 constraints. There are typically 12 decision variables and 3 constraints. There are typically 12 decision variables and 12 constraints. There are typically 4 decision variables and 3 constraints. There are typically 7 decision variables and 7 constraints. Question 37 Which of the following questions can be answered by PERT? Question 37 options: What is the probability that the project will be completed by a specific date? What are the critical activities? When will the entire project be completed? What are the noncritical activities? All of the above Question 38 A widely used mathematical programming technique designed to help managers and decision making relative to resource allocation is called __________. Question 38 options: computer programming constraint programming linear programming goal programming None of the above Question 39 Which of the following is a basic assumption of linear programming? Question 39 options: Divisibility does not exist, allowing only integer solutions. Solutions or variables may take values from - to . Proportionality exists in the objective function and constraints. Independence exists for the activities. The condition of uncertainty exists. Question 40 Bank Boston has a branch at Bryant College. The branch is busiest at the beginning of the college year when freshmen and transfer students open accounts. This year, freshmen arrived at the office at a rate of 40 per day (assume 8-hour days). On average, it takes the Bank Boston staff person about ten minutes to process each account application. The bank is considering having one or two tellers. Each teller is paid $12 per hour and the cost of waiting in line is assumed to be $8 per hour. What is the total daily waiting cost for the two-teller model? Question 40 options: $133.32 $4.17 $11.20 $266.56 Question 41 Management resources that need control include machinery usage, labor volume, money spent, time used, warehouse space used, and material usage. Question 41 options: True False Question 42 The inspection of cans of juice involves sampling some cans and weighing them. The overall average for the samples is 39 ounces. Each sample contains 36 cans. The standard deviation is estimated to be 2 ounces. The 99.7% lower control chart limit for the average would be __________. Question 42 options: 40.00 37.67 39.33 38.00 none Question 43 The maximal-flow technique might be used by the U.S. Army Corps of Engineers to study water run-off in an attempt to minimize the danger from floods. Question 43 options: True False Question 44 The maximal-flow model assumes that there is a net flow from "source" to "sink." Question 44 options: True False Question 45 A company can decide how many additional labor hours to acquire for a given week. Subcontractor workers will only work a maximum of 20 hours a week. The company must produce at least 200 units of product A, 300 units of product B, and 400 units of product C. In 1 hour of work, worker 1 can produce 15 units of product A, 10 units of product B, and 30 units of product C. Worker 2 can produce 5 units of product A, 20 units of product B, and 35 units of product C. Worker 3 can produce 20 units of product A, 15 units of product B, and 25 units of product C. Worker 1 demands a salary of $50/hr, worker 2 demands a salary of $40/hr, and worker 3 demands a salary of $45/hr.The company must choose how many hours they should contract with each worker to meet their production requirements and minimize labor cost. Assuming this is a linear programming problem, which of the following is the objective function? Question 45 options: Maximize 40X1 45X2 50X3 Minimize 40X1 45X2 50X3 Maximize 50X1 40X2 45X3 Minimize 50X1 40X2 45X3 Question 46 The difference between the left-hand side and right-hand side of a greater-than-or-equal-to constraint is referred to as __________. Question 46 options: constraint slack surplus shadow price none of the above Question 47 The average range of a process for packaging cereal is 1.1 ounces. Assume the sample size is 10. Using the data in the table above, what is the upper control chart limit for the sample ranges? Sample Size Mean Factor Upper Range Lower Range n A2 D4 D3 2 1.880 3.638 0 3 1.023 2.574 0 4 0.729 2.282 0 5 0.577 2.114 0 6 0.483 2.004 0 7 0.419 1.924 0.076 8 0.373 1.864 0.136 9 0.337 1.816 0.184 10 0.308 1.777 0.223 12 0.266 1.716 0.284 Question 47 options: 0.245 1.955 0.223 1.777 None of the above Question 48 Bags of pretzels are sampled to ensure proper weight. The overall average for the samples is 9 ounces. Each sample contains 25 bags. The standard deviation is estimated to be 3 ounces. The upper control chart limit (for 99.7% confidence) for the average would be __________ ounces. Question 48 options: 18.0 10.2 10.8 7.2 9.4 Question 49 One difficulty in waiting line analysis is that it is sometimes difficult to place a value on customer waiting time. Question 49 options: True False Question 50 Practically speaking, multiple optimal solutions __________. Question 50 options: are unbalanced are infeasible are degenerate provide management with greater flexibility in selecting and using resources are unbounded

Chapter 16 Long-Term Debt and Lease Financing Chapter 16 Long-Term Debt and Lease Financing True / False Questions 1. Over the decades, the times interest earned ratio of the Standard and Poor\'s\' 500 corporations has held fairly steady. True False 2. Homebuilding companies, like D.R. Horton Inc., realized significant losses in 2008-2009. True False 3. Par value and maturity value on a bond generally are the same. True False 4. A bond indenture is a bond with no specific collateral securing it. True False 5. When a company defaults on a secured debt, it is rare for the secured asset to be sold and the proceeds distributed to the debtor. True False 6. Debentures are commonly issued by small companies. True False 7. If a company has promised to pay interest on debt, it must pay the interest even if it shows no profit for the year, or else it may go bankrupt. True False 8. Bonds may be recalled only if there is a specific call provision in the bond. True False 9. The fact that interest payments on debt are fixed is both an advantage and a drawback. True False 10. An after-acquired property clause means that any new property acquired is placed under the original mortgage. True False 11. If a corporation offers greater protection to a given class of bondholders, it must raise the interest rate on its bonds to make them more attractive. True False 12. Generally the greater the protection offered to a given class of bondholders, the higher will be the interest rate on the bonds. True False 13. Because of the legal problems associated with specific asset claims in a secured bond offering, the trend is for companies to issue more debentures. True False 14. The call feature is usually advantageous to the bondholder. True False 15. The call premium tends to increase with the passage of time. True False 16. Under a sinking fund provision, money is set aside every year until the bond matures, then the money is used to repay the principal. True False 17. Long-term bond prices are more volatile than short-term bond prices given an equal percentage change in the interest rate. True False 18. The value of bonds will move opposite interest rates. True False 19. If you expect interest rates to go up, you should buy a long-term bond now. True False 20. The yield to maturity is the internal rate of return on a bond. True False 21. During economic upswings, spreads between bonds of different ratings tend to widen. True False 22. When interest rates rise, bond refunding becomes quite popular. True False 23. As interest rates decline, bond refunding should become more common. True False 24. Refunding a bond occurs when the company sells more bonds of the same series with maturity and coupon equal to the bonds sold earlier. True False 25. A bond can only be easily refunded if it has a call feature. True False 26. The costs of bond refunding are the call premium, and the underwriting costs on the old and new bond issue. True False 27. The payment of a call premium may generally be taken as an immediate tax write-off. True False 28. Costs of bond refunding are the call premium and the underwriting cost on the new bond issue. True False 29. The weighted average cost of capital is generally used as the discount rate in a bond-refunding decision. True False 30. Zero-coupon bonds are sold at a deep discount primarily because investors are not interested in owning them. True False 31. The prices of zero-coupon bonds tend to react violently to large swings in interest rates. True False 32. Zero-coupon bonds are sold at face value. True False 33. The difference between the initial bond price and the maturity value is amortized for tax purposes over the life of a zero-coupon bond. True False 34. The advantage of a zero-coupon bond to an investor is that the annual increase in the bond is taxable as ordinary income. True False 35. The primary advantage of investing in floating rate bonds is that the bonds will maintain a stable market value within a reasonable limit. True False 36. A floating rate bond\'s price is inversely related to the changes in interest rates. True False 37. A floating rate bond has a reasonably stable price but actual interest payments received change often over the life of the bond. True False 38. A bondholder may have paper losses as large as 30-40% or more at some point between the time of issue and redemption. True False 39. A Eurobond is a bond payable in the borrower\'s currency but sold outside the borrower\'s country. True False 40. In an inflationary economy, debt must be paid back with \"more expensive dollars.\" True False 41. A financing lease usually calls for an annual expense deduction equal to the lease payment. True False 42. Lease obligations currently appear only in the footnotes of U.S. corporate financial statements. True False 43. Leasing land provides a tax advantage to the lessee in that lease payments are tax deductible, while there is no deduction for depreciation for a landowner. True False 44. The essence of the treatment of long-term, non-cancelable leases is the same as if the company had borrowed the money and bought the asset. True False 45. The inclusion of leases on the balance sheet as an asset and liability has lowered firms\' debt to asset ratio. True False 46. An operating lease is generally a long-term, non-cancelable obligation. True False 47. A financial lease has many of the characteristics of a long-term debt obligation. True False 48. A capital lease is the same as an operating lease. True False 49. Bond refunding is generally advantageous to the investor because they get a higher future interest rate. True False 50. Many companies try to maintain investment grade status due to the significant yield differential when rated with a junk-bond status. True False 51. Yield spreads between investment grade and junk bond ratings are usually greater during economic boom periods. True False 52. The coupon rate of the bond varies indirectly with changes in interest rates. True False 53. Senior debentures usually provide lower interest rates than junior secured debt. True False 54. Bonds provide stable pricing because they offer a fixed coupon rate and maturity date unlike stocks. True False Multiple Choice Questions 55. Corporate debt has A. increased rapidly since World War II. B. increased slowly since World War II. C. held fairly steady over the last forty years. D. none of these. 56. The greater use of debt by corporations since the late 1960s is best shown by the A. declining interest coverage ratio. B. small amount of common stock sold. C. rising cost of interest. D. inability of earnings to keep up with the inflation. 57. The main cause for the increase in corporate debt in America is: A. rapid business expansion. B. inflationary impacts. C. inadequate internally-raised funds. D. All of these. 58. The term debenture refers to A. long-term, secured debt. B. long-term, unsecured debt. C. the after-acquired property clause. D. a 100-page document covering the specific terms of the offering. 59. The document that outlines the covenants and duties existing between bondholders and the issuing corporation is called A. an indenture. B. a debenture. C. secured debt. D. protective covenants. 60. Which of the following bonds offers the most security to the bondholder? A. Junior mortgage bonds B. Senior mortgage bonds C. Debenture bond D. Income bond 61. An indenture is A. the section of a corporation\'s bylaws pertaining to bond issues. B. the summary of the essential features of a stock issue. C. the contract between a corporation and a trustee acting for bondholders. D. the underwriting contract. 62. A debenture represents: A. unsecured debt. B. secured debt. C. a long document covering every detail of a bond issue. D. debt that is subordinate to preferred stock. 63. Which of the following is the lowest in priority of claims against a bankrupt firm? A. A junior mortgage bond B. A senior debenture C. Common stock D. A subordinated debenture 64. Many bonds have some orderly, preplanned, alternative system of repayment. Which of the following apply? A. Sinking funds B. Serial bonds C. Income bonds D. a and b 65. A serial bond repayment plan involves a A. lump-sum payment at maturity. B. conversion of debt to common stock. C. an early redemption of all debt. D. series of installments to retire the debt over the life of the issue. 66. Which of the following best represents the hierarchy of creditor and stockholder claims? A. Common stock, senior secured debt, subordinated debentures. B. Senior debentures, subordinated debentures, junior secured debt. C. Senior secured debt, subordinated debentures, common stock. D. Preferred stock, secured debt, debentures. 67. A \"subordinated debenture\" A. must be transferred with the bond to which it is attached. B. is used mainly by railroad companies and usually specifies equipment as collateral. C. entitles the bondholder to purchase shares of common stock at a specific price. D. is an unsecured bond with an inferior claim on assets in the event of liquidation. 68. Which of the following properly represents the hierarchy of creditor and stockholder claims? A. Common stock, senior secured debt, subordinated debentures. B. Preferred stock common stock, subordinated debentures. C. Debentures preferred stock, common stock. D. None of these is a valid hierarchy. 69. A call provision, which allows the corporation to force an early maturity on a bond issue, usually contains all but which of the following characteristics? A. Most bonds must be outstanding at least 5 years before being called. B. After the call date, the call premium tends to decline over time. C. The provision typically calls for debt conversion into common stock. D. The corporation will pay a premium over par for the bonds. 70. A bond with a call provision would generally be sold to yield A. less than a noncallable bond of similar character. B. the same as a similar noncallable bond. C. more than a noncallable bond of similar character. D. the same as similar convertible bonds. 71. A call feature allows: A. the bondholder to redeem the bond before the maturity date. B. the corporation to redeem the bond before the maturity date. C. the corporation to convert the bond to common stock. D. the bondholder to demand increased collateral. 72. The \"call\" provision on some bonds allows A. the bondholder to redeem the bond earlier than maturity, but usually involves a call premium. B. the corporation to request additional capital contributions from the bondholder. C. the corporation to redeem the bonds earlier than maturity but usually for a premium over the par value. D. the bondholder to convert the bond into preferred stock. 73. Buchanan Corp. is refunding $10 million worth of 10% debt. The new bonds will be issued for 8%. The corporation\'s tax rate is 35%. The call premium is 9%. What is the net cost of the call premium? A. $390,000 B. $1,080,000 C. $585,000 D. $702,000 74. A conversion feature allows: A. the bondholder to redeem the bond before the maturity date. B. the corporation to redeem the bond before the maturity date. C. the bondholder to convert the bond to common stock. D. the bondholder to demand increased collateral. 75. The dollar interest received divided by the market price of the bond is called the A. par value. B. coupon rate. C. current yield. D. yield to maturity. 76. Prices of existing bonds move _________ as market interest rates move ________. A. down, down B. up, up C. up, down D. Bond prices don\'t move as market interest rates move. 77. Which of the following is not a form of yield on a bond? A. coupon rate (nominal yield) B. current yield C. dividend yield D. yield to maturity 78. With regard to interest rates and bond prices it can be said that A. a 1% change in interest rates will cause a greater change in long-term bond prices than short-term prices. B. a 1% change in interest rates will cause a greater change in short-term bond prices than long-term prices. C. long-term rates are more volatile than short-term rates. D. a decrease in interest rates will cause bond prices to fall. 79. A bond with a coupon rate of 6.5%, maturing in 10 years at a value of $1,000 and current market price of $695 will have a current yield of A. 11.3% B. 10.2% C. 9.4% D. 8.5% 80. Short-term bond yields are generally ______ than long-term bond yields whereas long-term bond prices are generally ________ than short-term bond prices. A. more volatile; less volatile B. less volatile; more volatile C. less volatile; less volatile D. more volatile; more volatile 81. Which company is a leader in rating bonds? A. Goldman Sachs B. Bloomberg C. ValueLine D. Moody\'s Investor Service 82. The higher the bond rating A. the higher the interest rate on a bond. B. the lower the interest rate on a bond. C. the higher the call premium. D. the lower the call premium. 83. A bond with a coupon rate of 6.5%, maturing in 10 years at a value of $1,000 and a current market price of $950, will have a yield to maturity (using the approximation formula) of A. between 6% and 6.5% B. between 6.5% and 7% C. between 7% and 7.5% D. between 7.5% and 8% 84. Solow Corp. has a bond with annual interest payments of $109 maturing in 10 years at a value of $1,000 per bond. The current market price is $960. What will the nominal yield be? A. 9.1% B. 12.5% C. 11.5% D. 10.9% 85. Allais Company\'s bond has an $85 annual interest payment that will mature in 10 years at a value of $1,000. The bond has a current market price of $1140. What is the nominal yield of the bond? A. 7.5% B. 12.4% C. 8.5% D. 10% 86. Investors consider which of the following to be the most important measure of bond returns? A. coupon rate. B. yield to maturity. C. current yield. D. none of these. 87. A bond\'s rating can depend on all of the following except A. the corporation\'s debt-equity ratio. B. the corporation\'s size. C. the ability of the firm to make interest payments. D. the coupon rate on the bond. 88. Aa2 bond is rated lower than a _____ bond. A. Aa1 B. Aa3 C. A1 D. A2 89. If investors are pessimistic about the future, the spread between yields on high-grade and low-grade bonds A. increases. B. stays the same. C. decreases. D. none of these 90. Bond refunding occurs when A. interest rates in the market are sufficiently less than the coupon rate on the old bond. B. interest rates in the market have risen over the coupon rates on the old bond. C. the price of the old bond is less than par. D. the sinking fund has accumulated enough money to retire the bond issue. 91. The underwriting cost on a new bond issue A. is an immediate outflow and immediate tax write-off. B. is an immediate tax write-off with a deferred outflow. C. is a deferred outflow and deferred tax write-off. D. is an immediate outflow and deferred tax write-off. 92. The higher the tax rate, the ______ the net underwriting cost on the new bond issue. A. higher B. lower C. higher or lower D. substantially higher 93. Which of the following represents an inflow in a bond refunding decision? A. Call premium B. The write-off of underwriting cost C. The cost savings from lower interest rates D. Two of the above 94. Which of the following does not represent a tax implication in the bond refunding decision? A. Call premium B. Cost savings in lower interest rates C. Underwriting costs of new issue D. All of these have tax implications. 95. What discount rate is used in the net present value of the refunding decision? A. The before tax cost of the new debt. B. The after-tax cost of new debt. C. The weighted average cost of capital. D. The after-tax cost of total firm capital. 96. Which of the following is not a characteristic of a zero-coupon bond? A. It doesn\'t pay interest. B. It is sold at a deep discount from face value. C. The annual increase in the bond\'s price is not taxable as ordinary income. D. It provides a means for corporations to take annual deductions without current cash outflow. 97. From the corporate issuer viewpoint, a zero-coupon bond allows the firm to: A. receive deferred income for tax purposes. B. reduce the multiplier of the initial investment. C. defer payment obligations. D. take advantage of low volatility. 98. Zero-coupon bonds A. provide no annual interest payments. B. have highly stable prices even with changing interest rates. C. provide an investor with tax-free income until maturity. D. two of the above. 99. Floating rate bonds A. have interest payments based on some overall market rate. B. have the capacity for constant market value. C. usually have very broad limits that interest payments cannot exceed. D. all of these. 100. Which of the following is an advantage of floating rate bonds to investors? A. They allow for locking in a multiplier of the initial investment. B. Their prices tend to be highly stable regardless of interest rate changes. C. They are sold at a deep discount. D. All of these. 101. In general, how often are floating rate bonds adjusted to meet the market demands? A. Daily B. Weekly C. Quarterly D. Annually 102. The Haavelmo Widget Corporation has just signed a 60-month lease on an asset with a 6-year life. The lessor will retain the property at the end of the lease, and the present value of the minimum lease payments is $470,000. The estimated fair value of the property is $600,000. Is this an operating lease? A. no B. yes C. if the company elects to treat the lease as an operating lease D. more information is required 103. Floating rate bonds are most likely to be popular with investors when it is anticipated that A. interest rates will stay the same. B. interest rates will go up. C. interest rates will go down. D. short-term interest rates will be higher than long-term interest rates. 104. A Eurobond is a A. bond payable in the investor\'s currency but sold outside the borrower\'s country. B. bond payable in the investor\'s currency but sold inside the borrower\'s country. C. bond payable in the borrower\'s currency and sold inside the borrower\'s country. D. bond payable in the borrower\'s currency but sold outside the borrower\'s country. 105. Disclosure requirements for a Eurobond are _____ demanding than those of the Securities and Exchange Commission or other domestic regulatory agencies. A. more B. less C. the same D. need more information 106. The disadvantages of debt to the corporation include all but which of the following? A. Debt may have to be paid back with \"cheaper\" dollars. B. Interest and principal payments must be met. C. Indenture agreements may place burdensome restrictions on the firm. D. Too much debt may depress the firm\'s stock price. 107. Which of the following is not a financial advantage to companies using debt? A. Debt is paid back in \"cheaper\" dollars during inflationary periods. B. Bond holders have no control over the actions of management. C. Cost of debt can lower the weighted overall cost of capital. D. Interest payments are tax deductible. 108. Leasing is a popular form of financing because A. lease provisions are generally less restrictive than a bond indenture. B. the lessor likely has experience with the equipment being leased. C. the lessee may not be financially able to purchase. D. all of these. 109. Which of the following are advantages of leasing? A. A lease obligation may be substantially less restrictive than the provisions of a bond indenture. B. There may be no down payment as in a purchase. C. The negative effects of obsolescence may be eliminated. D. All of these. 110. Which one of these conditions must be met for a lease to qualify as a capital lease? A. The lease contains a bargain purchase price at the end of the lease. B. The lease must have a value of at least $10 million. C. The lease must have a life of 10 years. D. All of these. 111. An operating lease A. has a lease term equal to 75% or more of the estimated property. B. is usually short-term and is often cancelable at the option of the lessee. C. must show up on the balance sheet. D. none of these. 112. Long-term financing leases currently A. show up on the balance sheet. B. appear in the footnotes to the annual report. C. appear on the company\'s statement of retained earnings. D. do not appear on any financial statements. 113. Bond ratings are significantly based on all of the following except: A. times interest earned ratio B. debt-equity ratio C. current ratio D. return on assets 114. An advantage to the corporation of issuing zero coupon bonds is: A. lower interest rates than vanilla bonds B. cash inflow with lower cash outflow than vanilla bonds C. tax benefits due to amortization D. none of these are advantages 115. An investor would consider investing in a zero coupon bond because A. tax benefits of amortization B. lower volatility C. ability to lock in to multiplier of investment D. none of these are reasons to invest in zero coupons 116. Floating rate bonds provide the following advantage A. lower risk for the issuing corporation B. higher initial rate received by the investor C. higher tax advantages for the investor than a vanilla bond D. fixed market value for investor 117. The benefits of debt to the corporation include all of the following except: A. tax-deductible interest payments B. increases stock value when used heavily C. fixed obligation D. generally a lower overall cost than equity 118. Which of the following statements regarding the June 2009 bankruptcy of General Motors is false? A. The government provided more than $50 billion in bailout. B. The common stockholders received nothing. C. The U.S. government owns 85% of the common stock of GM. D. The preferred stockholders received nothing. Matching Questions 119. Match the following with the items below: 1. serial payments A long-term unsecured corporate bond. ____ 2. secured debt A legal contract covering every detail of a bond issue. ____ 3. par value The point at which the principal value of a bond is repaid to the lender. ____ 4. after-acquired property clause A loan which requires no assets as collateral. ____ 5. subordinated debenture Payment to the holder will take place only after the designated senior bondholders are satisfied. ____ 6. unsecured debt A loan based on the use of real property as collateral. ____ 7. sinking fund Indicates the loan was obtained by pledging assets as collateral. ____ 8. maturity date The principal value of the bond. ____ 9. debenture A method of retiring bonds in an orderly process over the life of the bond issue. ____ 10. zero-coupon bond Arise when a bond issue has several different maturity dates as part of the same issue. ____ 11. floating-rate bond A debt instrument which pays interest at a rate dependent on the market interest rate. ____ 12. mortgage agreement A debt instrument for which corporations incur only one cash outflow-the face value of the instrument at maturity. ____ 13. indenture A requirement in the bond issue stipulating that any new equipment purchased after the issue be placed under the original mortgage. ____ 120. Match the following with the items below: 1. coupon payment A long-term lease that has many of the characteristics of debt. ____ 2. capital lease A method of retiring bonds in an orderly process over the life of the bond issue. ____ 3. Eurobond Allows the corporation to retire securities before maturity. ____ 4. operating lease The process of retiring an old bond issue before maturity and replacing it on the balance sheet with a new bond issue. ____ 5. bond ratings Are designated by the degree of risk by Standard and Poor\'s and Moody\'s Investor Service. ____ 6. sinking fund Equals the yearly dollar interest payment divided by the current market price. ____ 7. yield to maturity The annualized rate-of-return an investor will receive if he or she holds the bond until it is redeemed. ____ 8. call feature Indicates the annual dollar amount of income from a bond. ____ 9. refunding A short-term nonbinding obligation that is easily cancelable. ____ 10. current yield Bonds payable or denominated in the borrower\'s currency, but sold outside the country of the borrower. ____ Essay Questions 121. Gray House is issuing bonds paying $95 annually that will mature fifteen years from today. The bond is currently selling for $980. Calculate: a) Coupon Rate b) Current Yield c) Yield To Maturity 122. Dairy Corp. has a $20 million bond obligation outstanding which it is considering refunding. The bonds were issued at 8% and the interest rates on similar bonds have declined to 6%. The bonds have five years of their 20-year maturity remaining. The new bond will have a 5-year maturity. Dairy will pay a call premium of 5% and will incur new underwriting costs of $400,000 immediately. There is no underwriting cost consideration on the old bond. The company is in a 40% tax bracket. To analyze the refunding decision, use a 5% discount rate. Should the old issue be refunded? 123. Shannon Corporation has two bonds outstanding. Both bonds have coupon rates of 7%. Current yields for bonds of equal risk are 8%. Bond A has a maturity of 20 years, while Bond B has a maturity of 10 years. Interest is paid semiannually. Calculate the following for both bonds using semiannual analysis. a) If market rates for bonds of equal risk fell to 6%, what would be the maximum price an investor would be willing to pay for these bonds? b) If market rates for bonds of equal risk remained at 8%, what would be the bonds\' current worth? c) If market rates for bonds of equal risk rose to 10%, what would be the bonds\' theoretical value?

Topic 5: Inheritance AQA A-Level year 2 Biology This is a 3 paged summary booklet for all you need to know about topic 5 Inheritance with all the necessary key terms and explanations that you will need! This is for the year 2/A2 AQA A-Level Biology new specification. It also includes on the last page a diagram to explain the homologous pairs. Its a very small minimised structural summary with all essential information to run back through before your exam the night before!