Question

3. Many bank loans are pegged to a specific interest rate, meaning the interest rate on the loan could go up or down during the term of the loan as the benchmark rate changes. What is the rate that serves as a benchmark for most international companies?

1. Federal Funds rate
2. Horizon Value
3. Prime Rate
4. LIBOR

4. With registered bonds the holder must prove US citizenship to receive coupon payments while bearer bonds can be held only by federal employees.

1. True
2. False

5. If a bondholder is in possession of a bond that allows the company to re-issue the bond with a lower coupon rate (should interest rates decline), what kind of bond is this?

1. Bearer bond
2. James Bond
3. Callable Bond
4. Sinking Fund Bond
5. Convertible Bond

6. Most public companies can be the target of a hostile takeover. When such a takeover takes place, there is a chance the surviving company will occasionally choose to not make good on amounts due on outstanding bonds. To offer some protection against default, bondholders will often require a special clause that will demand immediate payment should there be a significant change in ownership. What is the term given to such a clause?

1. Buzz Killer
2. Santa Clause
3. Poison Put/Pill
4. Debtor override
5. Chapter 10

7. When a corporation borrows from a bank, the bank will always require adherence to certain restrictions based on things like current ratio, Debt/Equity, EBIT. What is the name given to these requirements?

1. Loan covenants
2. Interpretive pass-through
3. Negative re-issue
4. Line of Credit

8. What is the term given to a bond that may transfer to an ownership stake in the company in the event of specific circumstances, like an equity event?

1. Puttable bond
2. Registered Bond
3. Callable bond
4. Convertible bond
5. Reverse Mortgage

9. Assume you own a company that is moving briskly toward bankruptcy, due in large part, to a heavy debt burden. Some of your lenders are getting nervous and want paid as soon as possible. You currently have four different “tranches” of debt. They include a first lien bank loan, senior unsecured bonds, and junior subordinated bonds and convertible bonds. What creditor has the best chance of getting paid for the full amount?

1. Junior subordinated bonds
2. Convertible bonds
3. First Lien bank loans
4. Senior unsecured bonds

10. Most companies utilize a working capital line of credit to finance day to day operations. These contracts are often secured by certain assets of the company. What are the most common assets used to provide collateral?

1. Accrued interest and prepaid expenses
2. A/R that is older than 90 days
3. A/R and inventory
4. Fixed Assets and Treasury Stock

Answer 1

Since, multiple questions have been posted, I have answered the first one.

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Question 3:

LIBOR. (which is Option D)

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Explanation:

LIBOR (London Interbank Offered Rate) is the interest rate at which all the major banks located in different parts of the world borrow from each other for meeting their short term requirements. It is also used as the basis for arriving at interest rates on other forms of loans. It serves as the benchmark for interest rates paid by consumers/companies on their borrowings. In other words, the interest rates on short-term borrowings move up and down in accordance with the fluctuations in LIBOR. Therefore, LIBOR serves as a benchmark for most international companies.