Which of the following statements is true? a A bond with a sinking fund will have the higher required yield than a bond without a sinking fund, all else equal. b Callable bonds will have a higher price than non-callable bonds, all else equal. c Floating rate bonds are bonds with floating par values tied to the stock price. d Senior bonds will have a higher price than subordinated bonds, all else equal. e Secured bonds will have a higher required yield than debenture bonds, all else equal Which of the following statements is true? a The primary operating goal of a publicly-owned firm interested in serving its stockholders should be to minimize the chances of losses and avoid financial distress. b Shareholders who have rights can never hold the same ownership position again even after exercising their rights. c A new public equity issue from a company with equity previously outstanding is called a seasoned equity offer. d Unpaid common stock dividends if not paid, can result in liquidation of the firm. e Debt capacity is often given as a reason for the value of the stock falling when equity is issued. It is because the high issue costs of a debt offering must be paid by the shareholders.
Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
Which of the following statements is true?
| a |
A bond with a sinking fund will have the higher required yield than a bond without a sinking fund, all else equal. |
|
| b |
Callable bonds will have a higher price than non-callable bonds, all else equal. |
|
| c |
Floating rate bonds are bonds with floating par values tied to the stock price. |
|
| d |
Senior bonds will have a higher price than subordinated bonds, all else equal. |
|
| e |
Secured bonds will have a higher required yield than debenture bonds, all else equal |
Which of the following statements is true?
| a |
The primary operating goal of a publicly-owned firm interested in serving its stockholders should be to minimize the chances of losses and avoid financial distress. |
|
| b |
Shareholders who have rights can never hold the same ownership position again even after exercising their rights. |
|
| c |
A new public equity issue from a company with equity previously outstanding is called a seasoned equity offer. |
|
| d |
Unpaid common stock dividends if not paid, can result in liquidation of the firm. |
|
| e |
Debt capacity is often given as a reason for the value of the stock falling when equity is issued. It is because the high issue costs of a debt offering must be paid by the shareholders. |
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