9. Which of the following are true about stocks and bonds (check oll thot apply)

Question

9. Which of the following are true about stocks and bonds (check oll thot apply) Stock dividends are tax-deductible, while bond interest is not. Stocks represent ownership in a company, while bonds do not Bondholders are the last to be paid if a company fails. In theory, stockholders are entitled to a share of corporate profits. Bond issuers are required to make periodic interest payments and stock issuers are required to pay quarterly dividends 10. The interest rate on a bond reflects (check all that opply) (S points) the risk of default by the issuer of the security -expected future inflation the dividends paid on common stock uncertainty over time periods for holding the bond the ease with which the bond can be converted to cash at fair market value 11. What is the primary goal of financial management? a. Increased earnings b. Maximizing cash flow c. Maximizing shareholder wealth d. Minimizing risk of the firm 12. A corporation is (2 points a. owned by stockholders who enjoy the privilege of limited liability b. easily divisible between owners c. a separate legal entity with perpetual life. d. all of the above. 13. Every financial market performs the following function: (2 points) a. It determines the level of interest rates b. It allows common stock to be traded. c. It allows loans to be made. d. It channels funds from lenders-savers to

Explanation / Answer

As per policy, only one question is allowed to answer at a time, so answering here 6 to 8 :

6) P = D1 / R -g   40 = 3 / R - 0.05 40R = 3+2 R = 5/40 = 0.125 or 12.5% 7) D0=3.60 D1= 3.60 * 1.2 = 4.32 D2 = 4.32 * 1.2 = 5.18 D3 = 5.18 * 1.2 = 6.22 D4 = 6.22 * 1.05=6.53 P3=D4 / R - g = 6.53 / 0.15 - 0.05 = $65.30 P = (65.30+6.53)/1.15^4 + 6.22/1.15^3 + 5.18/1.15^2 +4.32/1.15 71.83/1.74900625 + 6.22/1.520875 + 5.18/1.3225 + 4.32/1.15 41.07+4.09+3.92+3.76= $52.84 8) Net Working Capital = Current Assets - Current Liabilities 580 - 360 = $220

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