8. A pension plan:

Multiple Choice

• Is a contractual agreement between an employer and its employees in which the employer provides benefits to employees after they retire.

• Can be underfunded if the plan assets are more than the accumulated benefit obligation.

• Is always funded fully by employers.

• Can be a defined benefit plan or an undefined benefit plan.

• Is the same as Other Postretirement Benefits.

9. A disadvantage of bond financing is:

Multiple Choice

• Bonds do not affect owners' control.

• Interest on bonds is tax deductible.

• Bonds can increase return on equity.

• It allows firms to trade on the equity.

• Bonds pay periodic interest and the repayment of par value at maturity.

13. A bond is issued at par value when:

Multiple Choice

• The bond pays no interest.

• The bond is not between interest payment dates.

• Straight line amortization is used by the company.

• The market rate of interest is the same as the contract rate of interest.

• The bond is callable.

19. Bonds that give the issuer an option of retiring them before they mature are:

Multiple Choice

• Debentures.

• Serial bonds.

• Sinking fund bonds.

• Registered bonds.

• Callable bonds.