Reading 62: Features of Debt Securities - LOS d～ Q6-11

答案和详解如下：

6.Which of the following statements regarding a bond being called is TRUE? Call prices are known as regular redemption prices when bonds are called at:

A)   under the call provisions specified in the bond indenture.

B)   at the par value.

C)   at a discount.

D)   at a premium.

The correct answer was A)

When bonds are redeemed under the call provisions specified in the bond indenture, these are known as regular redemptions and the call prices are referred to as regular redemption prices which can be either at a premium or at par.

7.Which of the following is the appropriate redemption price when bonds are called according to the sinking fund provision?

A)   Special redemption price.

B)   Regular redemption price.

C)   General redemption price.

D)   Specific redemption price.

The correct answer was A)

Regular redemption and general redemption price are identical and refer to bonds being called according to the provisions specified in the bond indenture. When bonds are redeemed to comply with a sinking fund provision or because of a property sale mandated by government authority, the redemption prices (typically par value) are referred to as "special redemption prices." There is no such thing as a specific redemption price.

8.Which of the following is the appropriate redemption price when redemption funds are obtained as a result of a forced sale of assets for deregulatory purposes?

A)   General redemption price.

B)   Regular redemption price.

C)   Special redemption price.

D)   Special redemption price or the regular redemption price.

The correct answer was C)

When redemption funds are obtained as a result of a forced sale of assets for deregulatory purposes, the funds can be used to redeem bonds at the special redemption price, which are typically par value.

9.On November 15, 2006, Grinell Construction Company decided to issue bonds to help finance the acquisition of new construction equipment. They issued bonds totaling $10,000,000 with a 6% coupon rate due June 15, 2026. Grinell has agreed to pay the entire amount borrowed in one lump sum payment at the maturity date. Grinell is not required to make any principal payments prior to maturity. What type of bond structure has Grinell issued?

A)   Serial bonds.

B)   Bullet maturity.

C)   Income bonds.

D)   Redeemable bonds.

The correct answer was B)

These bonds have a bullet maturity structure because the issuer has agreed to pay the entire amount borrowed in one lump-sum payment at maturity.

10.Which of the following statements regarding a sinking fund provision is most accurate?

A)   It requires that the issuer set aside money based on a predefined schedule to accumulate the cash to retire the bonds at maturity.

B)   It requires that the issuer retire a portion of the principal through a series of principal payments over the life of the bond.

C)   It must be made through the payment of cash, paid to the trustee based on a predetermined schedule.

D)   It permits the issuer to retire more than the stipulated sinking fund amount if they choose.

The correct answer was B)

A sinking fund actually retires the bonds based on a schedule. This can be accomplished through either payment of cash or through the delivery of securities. An accelerated sinking fund provision allows the company to retire more than is stipulated in the indenture.

11.The refunding provision found in nonrefundable bonds allows bonds to be retired unless:

A)   the funds come from the sale of new common stock.

B)   the funds come from a lower cost bond issue.

C)   the funds come from earnings.

D)   market interest rates have increased substantially.

The correct answer was B)

Refunding from a new debt issue at a higher interest rate is not prohibited, however their purchase cannot be funded by the simultaneous issuance of lower coupon bonds.