E10-8 Jim Thome - 71014

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Jim Thome has prepared the following list of statements about bonds.

1. Bonds are a form of interest-bearing notes payable. 

2. When seeking long-term financing, an advantage of issuing bonds over issuing common stock is that stockholder control is not affected.  

3. When seeking long-term financing, an advantage of issuing common stock over issuing bonds is that tax savings result. 

4. Secured bonds have specific assets of the issuer pledged as collateral for the bonds.

 5. Secured bonds are also known as debenture bonds. 

6. Bonds that mature in installments are called term bonds. 

7 A conversion feature may be added to bonds to make them more attractive to bond buyers.

 

8. The rate used to determine the amount of cash interest the borrower pays is called the stated rate.

 9. Bond prices are usually quoted as a percentage of the face value of the bond. 

10. The present value of a bond is the value at which it should sell in the marketplace. 

 

Instructions Identify each statement above as true or false. If false, indicate how to correct the statement.

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