1. Select the correct statement.

a. Group of answer choices

b. The rights of the bondholder are stated in the proxy statement.

c. Protective covenants protect the rights of the company in a bond offering.

d. A sinking fund is used by firms to fund emergency expenses.

The call provision allows the company the option to buy back the bond from the investor before it matures.

2. If a bond has a coupon rate of 5% and the market rate of interest (the yield to maturity) is 3%, the bond will sell ______ and the price of the bond will ____ as the bond approaches maturity.

Group of answer choices

a. at a discount; decrease

b. at a premium; not change

c. at a discount; decrease

d. at a premium; decrease

3. All else being equal, which of the following provisions would INCREASE the interest rate on a bond?

Group of answer choices

a. Sinking fund

b. Convertible provision

c. Protective covenants

d. Call provision

4. Select the correct statement.

Group of answer choices

a. The convertible premium on a bond is the additional interest rate received on a convertible bond compared to a non-convertible bond

b. A private placement of bonds means that the company must abide by financial disclosure laws; public offerings of bonds do not have to abide by these laws.

c. Long-term bonds have more interest rate (price) risk than short-term bonds.

d. If the firm enters bankruptcy, the order of payment would be 1) common shareholders, 2) senior debt holders, 3) subordinated debt holders, and 4)preferred stockholders