A legal document that details the rights of bondholders and the issuer is called . If the legal document just described includes a sinking fund provision, is the bond considered to have more or less default risk, all else being equal? More default risk Less default risk You can distinguish the various types of bonds by their terms of contract, pledge of collateral, and so on. Identify the type of bond based on each description given in the table that follows: Description Type of Bond These bonds are backed by real estate holdings and equipment, and if a company goes bankrupt, the collateral can be sold off to compensate for the default. These bonds, more so than other collateralized securities, have prior claims over assets. These bonds are not backed by any physical collateral. They are backed by the reputation and creditworthiness of the issuing company. These bonds are considered the riskiest of all corporate bonds and thus offer the highest interest rates. The California Pollution Control Financing Authority (CPCFA) has a pollution control tax-exempt financing program. This program allows California businesses to get financing for the acquisition, construction, rehabilitation, and equipping of their facilities for pollution control, waste disposal, waste recovery, and other activities conducted in the public’s interest. Such bonds are called development or pollution control bonds. Development bonds have interest rates as corporate bonds. Based on your understanding of bond ratings and bond-rating criteria, which of the following statements is true? U.S. government bonds usually have the lowest yields in the bond markets. BBB bonds usually have the lowest yields in the bond markets.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable

Section: Chapter Questions

Problem 4GI: What is a bond? Define face value, maturity date, contract rate, bond and bond indenture.

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A legal document that details the rights of bondholders and the issuer is called .

If the legal document just described includes a sinking fund provision, is the bond considered to have more or less default risk, all else being equal?

More default risk

Less default risk

You can distinguish the various types of bonds by their terms of contract, pledge of collateral, and so on. Identify the type of bond based on each description given in the table that follows:

Description	Type of Bond
These bonds are backed by real estate holdings and equipment, and if a company goes bankrupt, the collateral can be sold off to compensate for the default. These bonds, more so than other collateralized securities, have prior claims over assets.
These bonds are not backed by any physical collateral. They are backed by the reputation and creditworthiness of the issuing company.
These bonds are considered the riskiest of all corporate bonds and thus offer the highest interest rates.

The California Pollution Control Financing Authority (CPCFA) has a pollution control tax-exempt financing program. This program allows California businesses to get financing for the acquisition, construction, rehabilitation, and equipping of their facilities for pollution control, waste disposal, waste recovery, and other activities conducted in the public’s interest.

Such bonds are called development or pollution control bonds. Development bonds have interest rates as corporate bonds.

Based on your understanding of bond ratings and bond-rating criteria, which of the following statements is true?

U.S. government bonds usually have the lowest yields in the bond markets.

BBB bonds usually have the lowest yields in the bond markets.

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