fin ex2
investment grade bonds
A, BBB
speculative grade bonds/junk bonds
BB & lower
t/f a takeover is an attempt by a person or a group to gain control of a firm by getting its stockholders to grant that person or group the authority to vote its shares to replace the current management
FALSE
t/f preferred stock is as hybrid--a sort of cross between common stock and a bond-- in the sense that it pays dividends that normally increase annually like a stock but its payments are contractually guaranteed like interest on a bond
FALSE
t/f the corporate valuation model can be used only when a company doesn't pay dividends
FALSE
t/f a proxy is a document giving one party the authority to act for another party, including the power to vote shares of common stock. proxies can be important tools relating to control of the firms
TRUE
t/f classified stock differentiates various classes of common stock, & using it is one way companies can meet special needs such as when owners of a start-up firm need additional equity capital but don't want to relinquish voting control
TRUE
t/f founders' shares are a type of classified stock where the shares are owner by the firm's founders, and they generally have more votes per share than the other classes of common stock
TRUE
t/f in equilibrium, a stock's price should equal its "true" or intrinsic value
TRUE
t/f intrinsic value is a long-run concept
TRUE
t/f managers should about actions that reduce intrinsic value
TRUE
t/f some class or classes of common stock are entitled to more voters per share than other classes
TRUE
t/f when a new issue of stock is brought to market, it is the marginal investor who determines the price at which the stock will trade
TRUE
t/f a bond's interest rate determines whether a bond will trade at par, below par, or above par
false
t/f before it matures, the price of any bond is always less than its face value
false
t/f callable bonds generally offer a slightly lower YTM
false
t/f the only cash payments the investor will receive from a zero coupon bond are the interest payments that are paid up until the maturity date
false
t/f treasury bonds have original maturities from 1 to 10 years, which treasury notes have original maturities of more than 10 years
false
t/f treasury bills are US government bonds with a maturity of up to one year
treu
t/f a bond will trade at a discount if its coupon rate is less than its YTM
true
t/f a bond's coupon rate determines whether a bond will trade at par, below par, or above par
true
t/f bonds with a high risk of default generally offer high yields
true
t/f if market interest rates rise to 5%, the value of the bond drops, and the bond will trade below par because the bond is paying a lower interest rate to its bondholders compared to the higher interest rate of 5% of other bonds in the market
true
t/f premium bonds are more likely to be called than discount bonds
true
t/f the amount of each coupon payment is determined by the coupon rate of the bond
true
t/f the bond certificate indicates the amounts and dates of all payments to be made
true
t/f the bond certificate type specifies that the coupons will be paid periodically until the maturity date of the bond
true
t/f the face value of a bond is repaid at maturity
true
t/f the par value is the amount of money a bond issuer promises to prepay bondholders at maturity. bondholders essentially loan money to the bond issuer
true
t/f yield to call is the price that will be paid if the issuer of a callable bond opts to pay it off early
true
t/f zero coupon bonds are also called pure discount bonds
true