Which is/are a reason why public corporations that issue preferred stock intend
ID: 2613203 • Letter: W
Question
Which is/are a reason why public corporations that issue preferred stock intend to pay the dividend on it? The dividends are tax-deductible by the issuer The issuer can not pay bond interest until prefered stock dividends have been paid Booth of the above None of the above Which is riskier for the investor? the muni-bond issuer's revenue bonds the muni-bond issuer's general obligation bonds the two are equally risky The current yield measures The muni-bond's par value is %5000. Its coupon rate is 3%, paid semi-annually. Current the bond market for $4500. What is its current yield, rounded to the nearest whole percentage? 3% 4% 5% 6% it can not be determined from the information given. For the investor, the issuer's zero-coupon bond is riskier than the issuer's coupon bond. True False Which allows the investor to exchange the preferred shares for the issuer's common stock? debentures indenture sinking fund convertibility feature call featureExplanation / Answer
Answer:1 D None of the above
Because Dividend are not tax deductiable and Preferred stocks are senior (i.e., higher ranking) to common stock, but subordinate to bonds in terms of claim (or rights to their share of the assets of the company).
Answer: 2 A. The muni-bonds issuer's revenur bonds.
Because Both are bonds issued by state or local municipalities. G.O.s are backed by the full revenue stream of the municipality (often called the General Fund). They typically require voter approval. Revenue bonds are backed by a specific project's revenues, but not the general tax revenues of the municipality. Revenue bonds are thus riskier than G.O.s
Answer:3 The Current Yield measures the rate of return on an investment, expressed as a percentage.
Answer:4 Current yield=75/4500=1.666%
=1.666*2=3.333%
Answer: 5 True Because zero-coupon bonds tend to be riskier than similar coupon-paying bonds because if the issuer defaults on a zero-coupon bond, the investor has not even received coupon payments -- there is more to lose.
Answer:6 D Convertibility feature
Because Convertible preferred stock gives holders the option to exchange their preferred shares for common shares at a speciFed rate.
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