1. Suppose that the common shares of Oceanic Luxury Vessels, Inc., is trading for $38 a share and that 5 million shares are outstanding. The company also has 75,000 bonds outstanding, which are selling at 102 percent of par. If Oceanic Luxury Vessels, Inc., was considering an active change to its capital structure so that the firm would have a D/E ratio of 1.6, which type of security (stocks or bonds) would it need to sell to accomplish this, and how much would it have to sell? A. Debt; $248.5 million B. Debt; $349.9 million C. Stock: $445.2 million D. Stock; $289.4 million
2. What type of bond offering involves a bidding process in which an investment bank purchases the bond either by outbidding other banks or directly negotiating with the issuer? A. Firm commitment underwriting B. Competitive sale C. Negotiated sale D. Best efforts underwriting