Chunky Chicken, Inc

question 32

Multiple Choice

Chunky Chicken, Inc., announced yesterday that it plans to issue $100 million in debenture bonds to fund the expansion of its fast food chain of restaurants. In financial terms, this means:

• A) the corporation will borrow $100 million worth of long-term financing. The bond issue will not carry any collateral.
• B) the corporation will issue $100 million worth of equity financing. The bond issue will be backed by the property and buildings purchased with the funds.
• C) the corporation will borrow $100 million worth of long-term financing. The issue will be backed by the property and buildings purchased with the funds.
• D) the corporation will issue $100 million worth of interest-free bonds. Financiers will be paid from the revenues created by the individual franchises.

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Definitions:

Money Market Mutual Funds

Investment funds that pool money from investors to purchase short-term, high-quality debt securities like treasury bills and commercial paper.

M1

A category of the money supply that includes all physical money like coins and currency, as well as demand deposits and checking accounts.

Commercial Banks

Financial institutions that offer a wide range of services such as accepting deposits, issuing loans, and providing basic investment products to the public and businesses.

Selling Securities

The act of offering stocks, bonds, or other financial instruments for sale to investors, either through public offerings or via private placements.