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Which of the following statements is CORRECT?   a. One disadvantage of zero coupon bonds is that the issuing firm cannot realize any tax savings from the use of debt until the bonds mature.     b. Income bonds must pay interest only if the company earns the interest. Thus, these securities cannot bankrupt a company prior to their maturity, and this makes them safer to the issuing corporation than "regular" bonds.     c. Once a firm declares bankruptcy, it must be liquidated by the trustee, who uses the proceeds to pay bondholders, unpaid wages, taxes, and legal fees.     d. Other things held constant, a callable bond should have a lower yield to maturity than a noncallable bond.     e. A firm with a sinking fund that gives it the choice of calling the required bonds at par or buying the bonds in the open market would generally choose the open market purchase if the coupon rate exceeded the going interest rate.

is NOT a characteristic of a money market instrument. A. illiquidity B. short maturity C. low risk D. none of above Which of the following is a characteristic of preferred stock? A. Give voting rights to its owner. B. It is like annuity. C. Investors cannot force the payment of the dividend. D. Dividends are tax-deductible for the fim as opposed to interest payment. Which of the following is NOT money market security? A. Bankers acceptance B. Treasury notes C. Federal funds D. Eurodollars and Eurodollar CD's

Please provide answer of question no. 2

Which of the following statements is​ FALSE? A. Equity cost of capital is normally higher then cost of​ debt, thus cost of debt can be examined in isolation. B. No matter if a firm is unlevered or​ levered, there is no difference in the market value of the firms total securities and market value of the​ firm’s assets. C. Introducing debt increases the risk even though it may be cheap and consequently increases firms equity cost of capital. D. Cost of Capital of equity and Leverage can be explicitly explained by first proposition that Modigliani and Miller introduced.

What is the relationship between the expected return of a stock and its fair expected return? When is a stock underpriced, overpriced, or fairly priced? Explain what happens to the firm’s cost of equity, cost of debt, and cost of capital when the firm increases the amount of debt in its capital structure. Assume all Modigliani and Miller assumptions hold and that there are no taxes. How can we use the internal rate of return to evaluate whether we should pursue a specific project? Should we pursue a project when the cost of capital is higher than the internal rate of return?

If the market value of a firm becomes less than its book value,  it becomes an attractive takeover target.the firm will be delisted by the stock exchange.the Securities and Exchange Commission will not allow it to declare dividends until the market value once again exceeds the book value.the firm will be unable to service its debt.

FASB allows debt to be shown at its fair market value. Consequently, if a company in financial difficulty uses the fair value option, it would report a gain because investors no longer want to purchase its debt. Do you think that this is appropriate?

a. What are the risks and rewards of investing in the stock market as compared to the bond market?b. “Because corporations do not actually raise any funds in secondary markets, they are less important to the economy than primary markets.” Comment.

Which of the following statements is correct? O Flotation costs under a best-efforts arrangement typically are less for a given new equity issue than the costs associated with an underwritten offering, and the corporation is more certain of getting the needed funds under a best-efforts offering. This is why best efforts deals are most common. O If a firm decides to issue securities through a direct (or private) placement, then the underwriting syndicate that is formed to distribute the securities to the public may. at its discretion, decide either to guarantee or not to guarantee the sale of the securities. O If the demand curve for a firm's stock is relatively flat. the firm will havea more difficult time raising a large amount of new equity funds for expansion than would be true if this demand curve were steeper. OIt is possible for a firm to go public, and yet not ralse any additional capital. O None of these.

Floating-rate debt is advantageous to investors because the interest rate moves up if market rates rise. Since floating-rate debt shifts price risk to companies, it offers no advantages to corporate issuers.  True  False

Identify the following as elther an advantage or a disadvantage of bond financing for a company. a. Bonds increase return on equity if the company earns a higher return with borrowed funds than it pays in interest. b. Interest on bonds is tax deductible. c. Bonds require payment of par value at maturity. d. Bonds do not affect owner control. e. A company earns a lower return with borrowed funds than it pays in interest. f. Unlike equity ownership, a par value payment is required at a specified date. Advantage

Which of the following statements is CORRECT? O The debt ratio that maximizes expected EPS generally exceeds the debt ratio that maximizes share price. O Increasing its use of financial leverage is one way to increase a firm's return on investors' capital (ROIC). O If a company were to issue debt and use the money to repurchase common stock, this would reduce its return on investors' capital (ROIC). O If a change in the bankruptcy code made bankruptcy less costly to corporations, this would tend to reduce corporations' debt ratios.

Preferred stock may be good for a company because it a. is not as costly as common stock or bonds. b. expands the capital base of the firm without diluting the common stock ownership. c. has no future negative ramifications when dividend payments are missed. d. does not require interest payment in times of financial trouble, but are tax-deductible when dividends are paid.

All of the following about a firm-commitment underwriting is true EXCEPT the investment banker guarantees the issuer a fixed amount of money from the stock sale. the underwriter bears the risk that the resale price might be lower than the price the underwriter pays. the investment banker actually buys the stock from the firm. the issuer bears the risk that the resale price might be lower than the price the underwriter pays.

which one is correct please confirm? QUESTION 21 Finance researcher Myron Gordon argues that ____.   a. the clientele effect has no influence on share value   b. the existence of transaction costs has no impact on the dividend decision   c. dividends reduce uncertainty, and thus the payment of dividends will increase the firm's value   d. risk-averse shareholders may prefer some dividends over the promise of future capital gains if the interest rate is expected to decline

Which of the following statements is true? O The secondary market is important because its existence increases the amount of capital that publicly traded firms can raise when they issue securities. O The secondary market is unimportant for publicly traded firms. The secondary market is important because it is where publicly traded firms raise capital.

2. Which of the following is a characteristic of preferred stock?A. Give voting rights to its owner.B. It is like annuity.C. Investors cannot force the payment of the dividend.D. Dividends are tax-deductible for the firm as opposed to interest payment.