True or False
1. ____ Zero coupon bonds are so named because companies do not record interest expense on them.
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2. ____ One advantage of debt financing is that interest is tax deductible.
3. ____ A company’s creditors can force it into bankruptcy if it can’t pay its debts.
4. ____ Banks typically charge stronger companies higher interest rates than weaker ones because the strong companies can better afford it.
5. ____ Financial leverage refers to a company’s ability to pay its debts off early, avoiding interest payments.
6. ____ Debt covenants exist to product the creditor.
7. ____ When a company issues a bond between interest dates, the first interest payment will be lower.
8. ____ Companies must use the effective interest rate method to compute and record interest.
9. ____ A debenture is a debt that is not secured.
10. ____ The maturity value of a bond is amount that the company will need to repay.