This section is from the book "Problems In Private Finance", by Charles W. Gerstenberg. See also: The Private Equity Edge: How Private Equity Players and the World's Top Companies Build Value and Wealth.
1. Is bond (1) (p. 325) a "purchase-money mortgage"bond?
2. Is the Jones-Laughlin bond a "first mortgage" bond? (See pp. 196 and 205.)
3. Is bond (3) (p. 325) secured by a first mortgage on all the property?
4. Are "consolidated first-mortgage bonds"usually secured wholly by a first mortgage? If not, why is a corporation justified in calling the bonds "first-mortgage bonds"?
5. Co. A is unable to pay interest on its third-mortgage bonds. A receiver is appointed who sees the necessity of improving the property. The court orders him to sell certificates. What lien will the holders of these certificates have on the property?
6. Suppose it could be shown that the sale of the receiver's certificates mentioned in problem 5 would materially strengthen the position of the second mortgage bondholders, would you change your answer?
7. Read Rule 4 on page 353. Assuming that the bond in question ran for ten years, and that an equal amount was laid aside annually during the life of the bond to make up the discount, at what rate of interest could the company sell its bonds at par without imposing "a greater annual payment upon consumers"?
8. Are the adjustment income bonds of the Hudson and Manhattan Railroad Company (pp. 933-65) cumulative, non-cumulative, profit-sharing, debenture, or mortgage, bonds? (pp. 939-40.)
9. How is the interest to which the bondholders are entitled determined? (pp. 939-940.) Of what advantage is this to the company?
10. Have the holders of the adjustment income bonds of the Hudson and Manhattan Co. at the present time any control over the company? (p. 940.) This will necessitate looking up the financial record of the company during the last few years.
11. Does the holder of a Jones-Laughlin bond have to pay the federal normal income tax on the interest received? What effect has this on the price of the bond?
12. What changes would be made in the Jones-Laughlin bond (pp. 190-1) to make it a bond registered as to principal? A fully registered bond?
13. Is there any difference between a coupon bond and a fully registered bond endorsed in blank?
14. What kind of a bond is most like a share of stock? (The elements of similarity to be considered are income, risk, control, form, and term.)
15. What kind of a share of stock is most like a bond?
16. As commodity prices rise, which would you prefer to have, a share of stock, or a bond?
17. Why do coupon bonds frequently sell a trifle higher than the registered bonds of the same issue? (See, e.g., some of the U. S. Government bond issues in the Annalist.)