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Lecture 2 Quizzes
Quiz by Chi Truong
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5 questions
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- Q1Which of the following business forms implies that the owners have limited liability for business debts?None of the abovePartnershipSole tradersCompany90s
- Q2Which of the following is CORRECT?When a company is liquidated, the proceeds from the company’s asset sales will be used to satisfy the obligations to senior bond holders first, then junior bond holders. The amount that remains after all obligations to bond holders having been satisfied will go to stockholdersWhen a company is liquidated, the proceeds from the company’s asset sales will be used to satisfy the obligations to preference share holders. The remaining amount will go to senior bond holders and then junior bond holders.When a company is liquidated, the proceeds from the company’s asset sales will be used to satisfy the obligations to stockholders. The amount that remains after all obligations to stockholders having been satisfied will go to senior bond holders and then junior bond holdersWhen a company is liquidated, the proceeds from the company’s asset sales will be shared among stockholders only.90s
- Q3Which of the following is INCORRECT?Bond covenants increase the protection for bond holders. Investors are therefore willing to pay higher prices for the bonds. Bond covenants increase the bond price.Most bond issues have bond covenants. However, it is often found that bond covenants do not have important effect on bond pricesManagers who work to maximize the wealth of shareholders may take on investments that are too risky for bond holders. When those investments work out well, most of the benefits will go to shareholders. When the investments do not work out, it is the bondholders who lose their capital.Bond covenants provide protection to bond holders. When these covenants are violated, bond holders are allowed to redeem their principals.90s
- Q4Which of the following is INCORRECT?With a callable bond, the issuer can repurchase the bond at a pre-specified price before maturity if he/she wantsNone of the above is incorrectWith a convertible bond, the bond holder can exchange the the bond for a number of shares of the issuer if he/she wantsAdding the convertible feature to a bond will increase the value of the bond while adding the callable feature to a bond will decrease the value of the bond.90s
- Q5Which of the following is INCORRECT?Eurodollar bonds are bonds denominated in US dollar and sold inside USBulldog bonds are bonds denominated in British pound and sold in UK by non-UK issuersYankee bonds are bonds that are denominated in US dollar and sold in US by non-US issuersSamurai bonds are bonds that are denominated in Yen currency and are sold in Japan by non-Japanese issuers90s