Common stock: the issuer must honor any missed dividend payments
Preferred stock: stockholder receives interest from the issuer
CONCEPT
Rules and Rights of Common and Preferred Stock
2
Select the statement that is
...
Common stock: the issuer must honor any missed dividend payments
Preferred stock: stockholder receives interest from the issuer
CONCEPT
Rules and Rights of Common and Preferred Stock
2
Select the statement that is true of preferred stock.
Preferred stock is not considered equity.
Owners of preferred stock have more voting rights than owners of common stock.
Preferred stock is generally thought to be more risky than common stock.
Owners of preferred stock have a stronger claim to a company's assets than owners of common stock.
CONCEPT
Types of Stock
3
In calculating the yield of an investment, what is EAR equivalent to?
APR
IRR
APY
NPV
CONCEPT
Yield
4
Which of the following is an advantage of bonds for a potential investor?
All bonds have the same interest rate, so they are predictable.
Companies can choose to pay off bonds early.
The diversity of bond types means they respond easily to market needs.
They typically generate higher returns than stocks.
CONCEPT
Advantages and Disadvantages of Bonds
5
You make a loan of $400 with a 6% annual compounded interest for a period of seven years.
What is your $400 worth seven years later?
$601
$232
$568
$199
CONCEPT
Future Value, Single Cash Flows
6
Rochelle wants to buy a bond, but she wants to avoid interest rate risk. She also prefers to receive a payment
every three months instead of the traditional six months.
What type of bond should she buy?
Government
Floating-rate
Zero-coupon
Fixed-rate
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