The Only Debt a Firm Has Outstanding Is a $10

question 1

Multiple Choice

The only debt a firm has outstanding is a $10 million, 8.0% bond issue.If their earnings before taxes is $5.2 million, then their times-interest-earned ratio would be:

• A)5.5
• B)6.5
• C)7.5
• D)None of the above

---

Definitions:

Call Options

Financial derivatives that give the holder the right but not the obligation to buy a specific stock or asset at a predetermined price within a specified period.

American Call Option

An options contract that allows the holder to buy the underlying asset at a specified price at any time before or on the expiration date.

Variance

A statistical measure that represents the dispersion of data points in a data set around the mean, indicating how spread out the data is.

American Call Option

An option contract that gives the holder the right, but not the obligation, to buy a security at a specified price before the option expires.