A bond’s rating can depend on all of the following except
A.the corporation’s debt-equity ratio.
B.the corporation’s size.
C.the ability of the firm to make interest payments.
D.the coupon rate on the bond.
Question 2 of 25
4.0 Points
The effect of a rights offering on a stockholder is
A.to increase his/her wealth.
B.to increase his/her wealth only if the new stock is purchased.
C.to decrease his/her wealth unless the stock is purchased.
D.to decrease his/her wealth if nothing is done.
Question 3 of 25
4.0 Points
Preferred stock dividends are a deductible expense for a corporation.
A. True
B. False
Question 4 of 25
4.0 Points
The costs of bond refunding are the call premium, and the underwriting costs on the old and new bond issue.
A. True
B. False
Question 5 of 25
4.0 Points
A “subordinated debenture”
A.must be transferred with the bond to which it is attached.
B.is used mainly by railroad companies and usually specifies equipment as collateral.
C.entitles the bondholder to purchase shares of common stock at a specific price.
D.is an unsecured bond with an inferior claim on assets in the event of liquidation.
Question 6 of 25
4.0 Points
Stockholders always have preemptive rights when new issues of stock are offered.
A. True
B. False
Question 7 of 25
4.0 Points
Debentures are commonly issued by small companies.
A. True
B. False
Question 8 of 25
4.0 Points
The subscription rate is generally _______ than the rights-on price and _______ than the ex-rights price.
A.higher, higher
B.higher, lower
C.lower, higher
D.lower, lower
Question 9 of 25
4.0 Points
Bondholders never have any control over the actions of a firm.
A. True
B. False
Question 10 of 25
4.0 Points
The increasing sophistication of individual investors has decreased the role of institutional investors in the stock market.
A. True
B. False
Question 11 of 25
4.0 Points
Stock purchased through a rights offering may carry lower margin requirements.
A. True
B. False
Question 12 of 25
4.0 Points
The term debenture refers to
A.long-term, secured debt.
B.long-term, unsecured debt.
C.the after-acquired property clause.
D.a 100-page document covering the specific terms of the offering.
Question 13 of 25
4.0 Points
The difference between the initial bond price and the maturity value is amortized for tax purposes over the life of a zero-coupon bond.
A. True
B. False
Question 14 of 25
4.0 Points
With regard to interest rates and bond prices it can be said that
A.a 1% change in interest rates will cause a greater change in long-term bond prices than short-term prices.
B.a 1% change in interest rates will cause a greater change in short-term bond prices than long-term prices.
C.long-term rates are more volatile than short-term rates.
D.a decrease in interest rates will cause bond prices to fall.
Question 15 of 25
4.0 Points
An increasing proportion of shares in the U.S. are owned by:
A.individual investors.
B.corporations (Treasury Stock).
C.institutions.
D.governments.
Question 16 of 25
4.0 Points
Under normal operating conditions, the board of directors is elected by
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