Exam 10: Bonds and Stocks: Characteristics and Valuations

Subordinate debentures are bonds whose claims are junior to the claims of those holding debenture bonds.

Firms issue more equities than bonds for which of the following reasons?

A bond will sell at a premium if its required return or discount rate is greater than its coupon rate.

Which of the following constitute default on a bond?

The stock requires that before dividends on common stock are paid, preferred dividends must be paid for the current period and for all previous periods in which preferred dividends were missed.

With registered bonds, the bonds are registered with a rating agency.

Corporate bonds are not as risky as common stocks from the same firm.

The value of a share of stock currently selling for $100 after a 1 for 5 split is:

Principal amount that the issuer is obligated to repay at maturity.

Preferred stock is an equity security that has a senior claim to the firm's earnings and assets over bonds.

Subordinate debentures are relatively low risk investments.

A stock dividend is what it sounds like: a dividend paid with shares of stock rather than cash.

A bond that does not permit future bond issues to be secured by any of the assets pledged as security to it is called a(n):

Bonds with junior or unsecured claims receive lower bond ratings, leading investors to demand higher yields to compensate for the higher risk.

Bonds rated lower than Ba1 by Moody's are considered to be high-yield bonds.

Putable bonds are sometimes referred to as:

Bond ratings are paid for by:

Most of the annual funds raised from security issues come from corporate bond sales.

Eurodollar bonds are dollar-denominated bonds that are sold outside the United States.

The value of a share of stock currently selling for $50 after a 1 for 5 split is: