70.2K

Verified Solution

Link Copied!

Which of the following is a feahire of a preferred stock? Preferred stockholders have priority over debt holders, with regard to earnings and assets of the firm. Preferred stockholders can elect the members of the board of directors and also vote on corporate issues. The firm has no obligation, contractual or implied, to pay preferred stock dividends: Preferred stockholders have the right to receive shares of new stock issue in proportion to their current ownership holdings. Preferred stockholders bave a higher priority claim to distributions made by the firm than common stockholders. QUESTION 2 Which of the following statements is correcr? A major disadvantage of a regular parmership or a corporation as a form of business is the fact that they do not offer their owners limited liabitity, whereas proprietonhips do. An advantage of the comporate form for many businesses is the fact that the comporate aax rate always exceeds the personal tax rate, which is the rate at which proprietorships and partnenhips are taxed There ate more parmeships and sole proprictorships than corporations in the U.S., but corporations produce more goods and services than do other forms of business. Because corpotations cajoy the benefis of limited liability, easy tansferability of owneship interest, unlimited lite, and favorable tax status relative to the siruation for parturships and proprietorships, most large basinesses choose to incorporate. Becaose lawyers have the incorporation process so auromated (e.G. word procensors for drawing up the necessary papers), it is less expensive to form a corporation than to form a proptietorship or partnership Which of the following securities have the highest priority with regard to eamings and assets of a firm? Corporate bonds Preferred stock Common stock American depository receipts (ADRs) Foreign stocks QUESTION 4 Which of the following is true about the change in a stock price? If Invertors demand higher returns to invest in stocks, then pnces should increase. If investors demand lower returns to invest in stocks, then prices should fall. If investor demand higher returus to invest in stocks, then phices should fall. If investors expect their investments to generate lower future cash flows, then prices should increase. If inventors expect their investments to generate higber future cash flows, then prices should fall. A bond that pays no annual interest and is sold at a discount below its par value is called a: mortgage bond. callable bond. convertible bond. putable bond. zero coupon bond. QUESTION 6 What is the formula to calculate P/E ratio? Market price per share - Book value per share Earnings available to common stockholders (EAC) - Number of shares Common dividends - Number of shares Market price per share - Earnings per share Average cost of funds x Invested capital The Sarbanes-Oxley Act of 2002 requires the chief executive officer of a publicly-traded corporation to keep confidential the procedures used to construct and report financial statements. certify financial reports that are submitted to the Securities and Exchange Commission. pursue interests that result in large gains for them and large losses for stockholders oversee the corporation's audit and attest the audit report render an unbiased (independent) opinion concerning the firm's financial statements QUESTION 8 Assumitg everything else equal, one of the concepts to consider to make sound financial decisions is that the riskier asseth always have lower marker value the riskier assets are more-valuable than (preferred to) less tisky assets the sooner cash is received, the more valuable it is investors always prefer short-term, low value, and high-tisk assets investors always achieve figher returns from less risky assets Which of the following bonds have the highest default risk for a given retum? A U.S Treasury bond with a 2-year maturity. An AAA corporate bond with a 7-year maturity. A BBB corporate bond with a 3-year maturity. A CCC corporate bond with a 10-year maturity. An AAA corporate bond with a 3-year maturity, QUESTION 10 The common stockholders have the right to vote for the changes in the firm's charter convert their stock into a bond receive the cash distributions before the preferred stockholders determine the market value of their share receive cumulative dividends A bond purchased for $950 was sold for $980 after one year. The interest received during the year is $25. The bond's yield is: 2.23% 5.79% 8.12% 5.25% 9.36% QUESTION 12 On the maturity date for a bond, the maturity value of the debt is to be repaid the first installment of the installment loan is due the interest payment is due the market interest rate tises above the coupon rate the market price of the bond rises above the face value of the debt The of a bond fluctuates continuously during its life. principal value face value maturity value coupon tate market value QUESTION 14 If interest rates decline, bondholders will eam: a lower rate of return on reinvested cash flowt. a higher current yield. no capital gain on the bond's maturity. a lower coupon interest on the bond a higher maturity value on the maharity date. Which of the following is an advantage of convertible bonds? Investors can convert the bonds into higher coupon rate bonds. Investors can choose to hold the company's bonds or convert the bonds into its stock. Investors are paid a penalty on the conversion of the bonds. Investors are redeemed for the difference between the face value and the market price on redemption of the bonds. Investors can claim interest for the remaining life of the bonds on the bonds' early conversion. QUESTION 16 Investors with a will demand a higher rate of return. higher time preference for consumption lower exposure to economic risks lower access to production opportunities higher financial creditworthiness lower default premium is the chance that a financial asset will not eam the return promised. Maturity Production opportunity Time preference for consumption Risk Inflation QUESTION 18 If the Federal Reserve loosens money supply then: inflation will decrease. interest rates will decrease. sale of Treasury securities will increase. credit supply will decrease. economic activity will decrease. The primary goal of a publicly owned firm interested in serving its stockholders should be to minimize the debt used by a firm maximize expected EPS minimize the chances of losses maximize the stock price per share maximize expected net income QUESTION 20 The investment function of finance takes decision regarding the cash flow of the investment corporation determines the expenses incurred on ensuring the socially acceptable behavior of the investment corporation delermines the values, risks, and retums associated with such financial assets is required to ensure that 50 percent of investments are in environment-friendly corporations. ensures that the corporations payout maximum dividends per share

Answer & Explanation Solved by verified expert

See Answer