Question

Bonds that are subject to retirement at a stated dollar amount prior to maturity at the option of the issuer are called

a. callable bonds.

b. early retirement bonds.

c. options.

d. debentures.

If the market interest rate is 5%, a $10,000, 6%, 10-year bond that pays interest annually would sell at an amount

a. less than face value.

b. equal to face value.

c. greater than face value.

d. that cannot be determined.

Horton Company purchased a building on July 1 by signing a long-term $480,000 mortgage with monthly payments of $4,400. The mortgage carries an interest rate of 10%. The amount owed on the mortgage after the first payment will be

a. $480,000.

b. $479,600.

c. $476,000.

d. $475,600.

The 2017 financial statements of Marker Co. contain the following selected data (in millions).

Current Assets	$ 75
Total Assets	140
Current Liabilities	40
Total Liabilities	90
Cash 8 The debt to assets ratio is a. 64.3%. b. 53.3%. c. 28.6%. d. 147.4%.

Answer 1

1

Bonds that are subject to retirement at a stated dollar amount prior to maturity at the option of the issuer are called

a. callable bonds.

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2

If the market interest rate is 5%, a $10,000, 6%, 10-year bond that pays interest annually would sell at an amount

Answer:

greater than face value

Explanation

Here market interest rate is 5%,annd coupon rate for the bond is 6% so bond would sell at an amount greater than face value

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3

Amount owed on the mortgage after the first payment = b. $479,600

Working notes for the above answer is as under

Interest amount in the first payment

=480,000*10%*1/12

=4400

So principal Payment is

=4400-4000

=400

Amount owed on the mortgage after the first payment =480,000-400=. $479,600

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4

Debt to assets ratio=64.3%

Working notes for the above answer is as under

Debt to assets ratio=

=Total debt / total Assets

=90/140

=0.6429 or 64.3%