Should Stephans Make or Buy the Subassemblies? What Is the Difference

question 104

Multiple Choice

Should Stephans make or buy the subassemblies? What is the difference between the two alternatives?

• A)Buy; savings = $20,000
• B)Buy; savings = $50,000
• C)Make; savings = $60,000
• D)Make; savings = $5,000

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Definitions:

Warrants

Securities that grant the holder the right to purchase the issuer's stock at a specified price within a certain time frame.

Exercise Price

The rate at which an option's owner is entitled to purchase or sell the base asset.

Coupon Interest Rate

The annual interest rate paid on a bond, expressed as a percentage of the face value, paid from issuer to bondholder.

Straight Bonds

Debt securities issued by corporations or governments that pay periodic interest payments and return the principal amount at maturity without any special features such as convertibility or callability.