Problem 1: Orpah, Inc. borrowed $12,000 for 4 months on a discount basis. The lender used an interest rate of 8% to calculate the discount. The amount of cash Orpah, Inc. actually had available to use from this loan was:
- $12,320
- $11,680
- $12,000
- $11,040
Problem 2 - When a company issues a bond at a premium:
- the company is more profitable than most companies in its industry.
- the investors' interest income will be more than the interest received each year.
- investors perceive the bond to be a very safe investment.
- the investors' interest income will be less than the interest received each year.
Problem 3 - The principal reason for a company having a common stock split is to:
- a. increase the total cash dividends paid to stockholders.
- b. decrease the market value per share of common stock.
- c. capitalize retained earnings.
- d. decrease total owners' equity.