3. Compare debt vs. equity. Which statement(s) is(are) correet? I, debtholders d

Question

3. Compare debt vs. equity. Which statement(s) is(are) correet? I, debtholders do not have owners interest equityholders do Il. equityholders have voting power for board of direcroUT debtholders do not III. Dividends for equityholders are considered a cost of doing business and are tax deductible. IV. Creditors have legal recourse if interest or principal payments are missed. A. I and II only B. I, I and IlI only C. I, II and IV only D. II, III and IV only E, III, and IV only 4. A call provision grants the bond issuer the: A. right to contact each bondholder to determine if he or she would like to extend the term of his or her bonds B. option to exchange the bonds for equity securities. C. right to automatically extend the bond's maturity date. D. right to repurchase the bonds on the open market prior to maturity. E. option of repurchasing the bonds prior to maturity at a prespecified price.

Explanation / Answer

3

dividends are not tax deductible, other three options are correct

correct option is option -C

4

call provision gives the issuer a right to repurchase bond directly from the buyer before maturity date. Open market purchase can be made without call provision.

correct option is option -E

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