Question

Identify each statement as true or false. 1. Bonds are a form of interest-bearing notes payable. 2. Secured bonds have specific assets of the issuer pledged as collateral for the bonds. 3. Secured bonds are also known as debenture bonds. 4. A conversion feature may be added to bonds to make them more attractive to bond buyers. 5. The rate used to determine the amount of cash interest the borrower pays is called the stated rate. 6. Bond prices are usually quoted as a percentage of the face value of the bond. 7. The present value of a bond is the value at which it should sell in the marketplace.

Answer 1

Answer:

1. True

2. True

3. False

4. True

5. False

6. True

7. True

Explanation:

1- Bond are a form of interest bearing notes payable, they are used by and corporations (also issued by them), universities and governmental entities as well.

2- Secured bond is a type of bond that is secure by the issuer`s pledge of a specific asset and that is a form of collateral on the loan.

3- It is the opposite, whenever a bond is unsecured, it can be referred to as a debenture, this kind of bond generally have a more specific purpose, they are typically issued to raise capital to meet the expenses of a project or to pay for a expansion in business.

4- Conversion are features added to bonds because it able to them to lower the coupon rate on debt and to delay dilution.  It gives the holder the option to convert or exchange the bonde for a predetermined number of shares in the issuing company, they also have lower interest rate what is more attractive to bond buyers.

5-The rate used to determine the amount of cash interest the borrower pays is called the coupon rate.

6- The rate of interest the bond issuer will pay quoted as the face value of the bond is expressed as a percentage, for example: a 4% coupon rate means that bondholders will receive 4%* $1000 (face value) = $40 every year.

7- The present value of a bond is determinate by an amount you have been promised to receive in the future, but valued today, so if you want to sell it then you should sell it taking into consideration its present value.