1. Which of the following statements is true of the debt to equity ratio?
A. If the debt to equity ratio is greater than 1, the company is then financing more assets with equity than with debt.
B.The higher the debt to equity ratio, the greater the company’s financial risk.
C. If the debt to equity ratio is less than 1, the company is then financing more assets with debt than with equity.
D. The higher the debt to equity ratio, the lower the company’s financial risk.
2. On June 1, 2015, Smith & Beecham Services issued $45,000 of 8% bonds that mature in five years. They were sold at par. The bonds pay semiannual interest payments on June 30 and December 31 of each year. On December 31, 2015, how much interest is paid to bondholders?
A. $1,200
B. $3,600
C. $1,800
D. $900
3. On June 1, 2015, Smith & Beecham Services issued $30,000 of 7.50% bonds that mature in five years. They were sold at a premium, for a total of $31,250. The bonds pay semiannual interest payments on June 30 and December 31 of each year. On December 31, 2015, how much interest is paid to bondholders?
A. $1,1250.00
B. $1,171.88
C. $ 2,250.00
D. $2,343.75
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