Exam 20: Markets for Corporate Senior Instruments: II

Because the tax code exempts 70% of qualified dividends from federal income taxation if the recipient is a qualified corporation, the major buyers of preferred stock are corporations seeking tax-advantaged investments; these investors are willing to accept a lower dividend rate.

In assessing management quality, Moody's tries to understand the business strategies and policies formulated by investors.

Which of the below statements is TRUE?

________ is a class of stock, not a debt instrument, but it shares characteristics of both common stock and debt.

Which of the below statements is FALSE?

In regards to adjustable-rate preferred stock, which of the below statements are FALSE?

Preferred stock, particularly cumulative preferred stock, has some important similarities with debt including: ________.

Can failure to make preferred stock dividend payments force a firm into bankruptcy? Explain.

The warrants on Eurobonds are varied: some are equity warrants, others are debt warrants, and still others may be currency warrants. Describe these three types of warrants on Eurobonds.

The major issuers of adjustable-rate preferred stock (ARPS) have been bank holding companies. There are two reasons bank holding companies have become major issuers of ARPS. Describe these two reasons.