1. When the effective cost of debt is greater its the nominal cost, a. the initial net measurement of the bond is more t

[answerhappygod]

1. When the effective cost of debt is greater its the nominal
cost,
a. the initial net measurement of the bond is more than the face
value.
b. The net proceeds is more than the face value.
c. The entity records a discount on the bond payable.
d. The interest expense is less than the interest payments.

2. The cost of retained earnings is less than the cost of ordinary
shares because of
a. the issuance cost.
b. the trust fund doctrine.
c. agency costs of free cash flow.
d. the taxation on earnings.
3. GHI Corp., a new and relatively unknown entity, has issued
5-year bonds with an interest rate of 30%. These may also be traded
in by the holder for 5 ordinary shares for every P1,000 face value
of the bond. GHI added this feature so that once it has better
profits, it can entice creditors to be investors instead. This
would mean that the bond is a/an
a. redeemable junk bond
b. redeemable income bond
c. convertible income bond
d. convertible junk bond
4. A bond does not pay out regular interest. This means
that
a. It is a junk bond.
b. It is unsecured.
c. This is a bad investment.
d. It is a zero-coupon bond.
5. Under this concept, the entity would first use a fixed ratio of
retained earnings and long-term debt financing to meet its
financing needs
a. Signalling Theory
b. Pecking Order Theory
c. Financial leverage
d. Retained earnings breakpoint