Bonds (Comprehension Text p 81)

Companies regularly finance their activities by issuing bonds.

• True

• False

If you answered false to Question 1 justify by quoting from the text.

Bond issuing companies use investment banks to find investors.

• True

• False

Bonds are repaid at 100% when they mature, unless the borrower is insolvent.

• True

• False

Bondholders get their money back if a company goes bankrupt.

• True

• False

If you answered false to question 5, justify by quoting from the text

Bond coupons are generally lower than share dividends.

• True

• False

For profitable companies, there are tax advantages to issuing stocks or shares rather than bonds.

• True

• False

If you answered false to question 8, justify by quoting from the text.

A bond paying 5% interest would lose in value if interest rates fell to 4%

• True

• False