1. Which of the following statements about the characteristics of bonds and stocks is false? Bond holders do not benefit directly from any increase in the corporation's profits or asset value. b. Stock holders are residual claimants. The size of debt market is often larger than that of stock markets, although stock markets tend to attract more attention from the public. d. The stock market is characterized by extreme volatility of stock prices. None of the above are false. a. с. е.

1. Which of the following statements about the characteristics of bonds and stocks is false? Bond holders do not benefit directly from any increase in the corporation's profits or asset value. b. Stock holders are residual claimants. The size of debt market is often larger than that of stock markets, although stock markets tend to attract more attention from the public. d. The stock market is characterized by extreme volatility of stock prices. None of the above are false. a. с. е.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Which of the following is FALSE regarding bonds? The yield to maturity is the return an investor would earn if she buys the bond at the current price and holds it to maturity, collecting all of the promised coupon payments and the par value at maturity bond holders vote to elect members to the board of directors a bond indenture includes all of the basic terms of a bond issue bondholders have legal recourse if a company fails to make the promised interest payments or the par value at maturity corporate bonds usually have a fixed coupon rate with semi-annual interest payments.
Which statement is FALSE regarding the difference between shareholders and bondholders? * Bondholders are mere creditors of the company to whom the company has to repay a certain amount. Shareholders are the real owners in the company. Shareholders have more rights (voting rights, priority at times of bankruptcy, payment preferences) than bondholders. Shareholders are more exposed to risks than bondholders.
1.
Which of the following statements is most correct? Group of answer choices A debenture is a secured bond that is backed by some or all of the firm’s fixed assets. Junk bonds typically have a lower yield to maturity relative to investment grade bonds. Subordinated debt has more default risk than senior debt. All of the statements above are correct. None of the statements above is correct.
16. Bonds are a popular source of financing because a.financial analysts tend to downgrade a company that has raised large amounts of cash by frequent issues of shares. b.a company having cash flow problems can postpone payment of interest to bondholders. c.the bondholders can always convert their bonds into shares if they choose. d.bond interest expense is deductible for tax purposes, while dividends paid on shares are not.
e. All of the above f. None of the above 7. Which is incorrect about public offering? a. It is sold to limited to qualified investors. b. It is sold to non-qualified and qualified investors. c. It is sold to any interested investors. d. Itis sold to whether big or small investors. e. All of the above f. None of the above 8. Which is least likely true about bonds? a. It is a financial security. b. The issuer has the obligation to make specified payments. c. Bondholders have the right to make decisions onthe fim's affairs. d. Bondholders have the right to claim interest payments. e.c & d f. All of the above g. None of the above 9. It refers to the legal contract for the bond. a. Debenture b. Indenture с. Coupon d. Bondcertificate e. All of the above f. None of the above 10. Which is correct about covenants? a. Covenants are written promises of the issuer that is enforceable by law. b. Covenants are promises to do andnotto do. c. Covenants include interest and principal payments. d.…
Corporate bonds are riskier than US Treasury, so they pay default risk premium over what Treasury pays to stay competitive in the market. True False
11- which of the statements given below is false ? Please select one; a) discounting the future is the procedure used to find the future value of a dollar received today b) a long term bonds price is less affected by interest rate movements than a short term bonds price c) the current yield is the best measure of an investors return from holding a bond d) unless a bond defaults an investor cannot lose money investing in bonds e) all of the above
True or False An asset or stock with a beta less than 1.0 means the stock is more risky than the market in general. Bonds that have a callable feature allow the bond holder to convert their debt to common shares of stock. Bond holders have voting rights and common shareholders do not. Bond holders have first claim on assets in the event of a bankruptcy, so they are less risky than common stock. An ordinary annuity is preferred by investors because they receive their payment at the beginning of each period.
The so-called ``flight to quality'', which happens during a financial crisis, causes the risk premium between risky and risk-free securities to be Question 6 options: eliminated. reduced. unchanged (there is no effect). increased.
18) Which of the following statements is false: A) The expectations hypothesis of the term structure of interest rates states that the long-term interest rate should be approximately equal to the sum of expected short-term interest rates over the contract horizon. B) The Gordon Growth Formula predicts that the price-dividend ratio fluctuates due to changes in interest rate and/or dividend growth rate. C) Fluctuations in the stock market depend only on investor expectations of future dividends. D) Bank runs can sometimes be prevented through deposit insurance. E) If the term structure of interest rates does not change, the price of zero-coupon bonds will increase over time.
6. Bonds and stocks are two financial products. Prepare a briefing note on these two financial products that are the core offerings of a financial market. Provide a comparison of these products. What characteristics of bonds and stocks explain the valuation strategy of each of these financial products? How will you adapt the growth stages model to value stocks (i) in the very long run; and (ii) for a company with no history of dividend payments. Prepare a briefing note for your brokerage.

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