2. Sadowski Brick Company issues a ten-year bond with a par
value of $400,000 on January 1. Sadowski Brick Company’s bond has a
coupon rate of 6% per annum, paid semi-annually. The interest
incurred by Sadowski every six months on this bond is:
a. $18,000
b. $24,000
c. $12,000
d. $300,000
3. __ Under the corporate form of business organization
a. a stockholder is personally liable for the debts of the
corporation.
b. stockholders’ acts can bind the corporation even though the
stockholders have not been appointed as agents of the
corporation.
c. the corporation is a separate business entity from its
owners.
d. stockholders wishing to sell their corporation shares must
get the approval of other stockholders.
4. ___ Harden Corporation issued a bond with a par amount of
$500,000 and coupon rate of 7% per annum paid annually to finance
the building of its new plant. Investors weren’t satisfied with the
coupon rate and bought the bonds at a discount making the proceeds
from the bond sale $460,000. When the bond matures in 15 years, how
much principal will the Harden Corporation have to pay investors?
(No principal payments will be made before maturity.)
a. $460,000.
b. $500,000.
c. $35,000.
d. $250,000.
5. __ A company that is financially leveraged is one
that
a. has a high earnings per share.
b. contains debt financing.
c. contains equity financing.
d. has a high current ratio.