1. Nicholas Industries can issue a 20-year bond with a 6% annual coupon. This bond is not convertible, is not callable, and has no sinking fund. Alternatively, Nicholas could issue a 20-year bond that is convertible into common equity, may be called, and has a sinking fund. Which of the following most accurately describes the coupon rate that Nicholas would have to pay on the convertible, callable bond?
a. It could be less than, equal to, or greater than 6%.
b. Greater than 6%.
c. Exactly equal to 8%.
d. Less than 6%.
e. Exactly equal to 6%.
2. Amram Company's current ratio is 1.9. Considered alone, which of the following actions would reduce the company's current ratio?
a. Use cash to reduce accounts payable.
b. Borrow using short-term notes payable and use the proceeds to reduce accruals.
c. Borrow using short-term notes payable and use the proceeds to reduce long-term debt.
d. Use cash to reduce accruals.
e. Use cash to reduce short-term notes payable.