Which statement is incorrect?Zero-coupon bonds are normally sold at a big discount because buyers do not earn any couponpaymentEuro bonds are bonds that are sold by US firms to raise US dollarMajor investors of preferred stocks are senior people as preferred stocks pay dividend likebonds but give holders voting right like stocks.Junk bonds are often used for mergers and acquisition deals

Solution:- Zero coupon bonds are those bonds which only pay redemption value at end, and are issued…

Which statement is incorrect? Zero-coupon bonds are normally sold at a big discount because buyers do not earn any coupon payment O Euro bonds are bonds that are sold by US firms to raise US dollar O Major investors of preferred stocks are senior people as preferred stocks pay dividend like bonds but give holders voting right like stocks. O Junk bonds are often used for mergers and acquisition deals

Which statement is incorrect? Zero-coupon bonds are normally sold at a big discount because buyers do not earn any coupon payment O Euro bonds are bonds that are sold by US firms to raise US dollar O Major investors of preferred stocks are senior people as preferred stocks pay dividend like bonds but give holders voting right like stocks. O Junk bonds are often used for mergers and acquisition deals

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter9: Long-term Liabilities

Section: Chapter Questions

Problem 16MCQ

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Similar questions

True of False Bond holders have voting rights and common shareholders do not. Because the likelihood of the U.S. Government paying back their debts is nearly 100%, U.S. bonds are classified as "risk free" investments. In general, a project or investment with a high standard deviation is viewed as less risky than one with a low standard deviation. When the present value of a bond exceeds the future value of the bond, it is selling at a premium. Preferred stock has an advantage over common stock because preferred shareholders have voting rights and common stock holders do not.
What is NOT considered as an advantage of buying bonds in the Philippines? * Bonds are much less volatile compared to other forms of investments that can fluctuate depending on the market trends. Bonds perform better than the high-risk, high-reward stock investments. Interest on bonds are paid periodically, giving the buyer fixed passive income on top of his other sources of income or revenue. The income one receives from bonds is much higher compared to the savings accounts and time deposits. The low-risk features of bonds can offset potential losses that high-risk investments may incur.
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
The RBA decides to buy bonds and securities from commercial banks on the open market. Other things being equal, this will result in a(n) _________ in the price of financial assets. short term increase, but longer-term fall increase decrease short term decrease, but longer-term rise no change
Which of the following is one reason corporations issue convertible debt? They can avoid issue costs associated with equity capital. O They can easily sell convertible debt even if the company has a poor credit rating. O They can obtain debt financing at lower rates. O They can always sell convertible bonds at a premium.
Nhich of the below statements is TRUE? O a. Frequently, the ability of an issuer to make interest and principal payments is seriously and unexpectedly changed by a naturai or industrial accident or some regulatory change. O b. The lowest-grade bonds are designated by Moody's by the symbol Aaa and by the other three rating systems by the symbol AA O . Fixed-rate securities are attractive to some institutionial investors because they allow them to buy an asset with an income stream that closely matches the floating nature of the income of some of their liabilities. O d. Each rating agency periodicalily publishes a table showirig the upgrade and downgrade history of the issues that it rated.
1. Which of the following statements is false for convertible debt? * None of the below In the U.S., convertibles tend to be issued by smaller firms. Convertible debt is useful for a company of unknown risk because the effects of risk are opposite on the two value components (straight debt and option to convert) and tend to cancel each other out. Convertible debt holders have less incentive to increase the risk of the firm's assets than straight debt holders. Convertible debt sends a less negative signal to the market than an equity issue.
A company with a poor credit rating needs to raise funds for expansion, but the bank will not give them a loan. In addition, their common stock prices are already low, so they do not want to issue more shares of common stock. What would be the best way for this company to raise funds for the expansion? Sell secured bonds. Sell callable bonds. Sell convertible bonds. Sell unsecured bonds.
Which of the following is a disadvantage of using bonds? a. Bondholders do not participate in extraordinary profits; the payments are limited to interest. b. Bondholders do not have voting rights. c. Debt (other than income bonds) produces fixed charges, increasing the firm’s financial leverage. d. Flotation costs of bonds are generally lower than those of ordinary (common) equity shares.
“Inside the company fixed income managers bought bonds but they did not keep them for very long at all. Instead, they were constantly buying, exchanging and selling the bonds in their portfolios” Explain why the behavior described in the above quote may happen in terms of interest-rate risk immunization and downgrade risk. Do not discuss speculation or arbitrage as causes of this behavior as these will not gain any credit in this examination.
True or False: Corporations are very interested in their potential bond rating as it impacts their cost of capital. The spread of a bond is common term used by investors. The spread of a bond is that additional compensation for the risk of a bond (relative to a risk free rate). The spread on Junk or High Yield Bonds is generally higher than the spread on bonds rated BBB or higher.
when are corporations likely they called the Bonds? A. When the market interest rate is higher than the contract rate, b. When the contract rate is higher than the market rate. C. When their bonds at selling at par with market d. When standard and poor are bullish about treasury bills E. None of the above