1. If a bank loan officer were considering a company's request for a loan, which of the following statements would you consider to be CORRECT?
a. Other things held constant, the lower the current ratio, the lower the interest rate the bank would charge the firm.
b. The lower the company's EBITDA coverage ratio, other things held constant, the lower the interest rate the bank would charge the firm.
c. Other things held constant, the higher the debt ratio, the lower the interest rate the bank would charge the firm.
d. Other things held constant, the lower the debt ratio, the lower the interest rate the bank would charge the firm.
e. The lower the company's TIE ratio, other things held constant, the lower the interest rate the bank would charge the firm.
2. A 15-year bond has an annual coupon rate of 8%. The coupon rate will remain fixed until the bond matures. The bond has a yield to maturity of 6%. Which of the following statements is CORRECT?
a. The bond is currently selling at a price below its par value.
b. If market interest rates remain unchanged, the bond's price one year from now will be lower than it is today.
c. The bond should currently be selling at its par value.
d. If market interest rates remain unchanged, the bond's price one year from now will be higher than it is today.
e. If market interest rates decline, the price of the bond will also decline.