Stocks: Bond and Preferred Stock
Question 1 Subordinated debentures are more risky than unsubordinated debentures because the claims of subordinated debenture holders are less likely to be honored in the event of liquidation. Answer True False 1 points
Question 2 Junk bonds are also called high-yield bonds. Answer True False 1 points
Question 3 The expected yield on junk bonds is lower than the yield on AAA-rated bonds because of the higher default risk associated with junk bonds. Answer True False 1 points
Question 4 In general, interest on bonds, like dividends on preferred stock, may be deferred until a later date at the discretion of management, making debt financing more appealing to corporate managers. Answer True False 1 points
Question 5 Restrictive provisions in bond indenture agreements are designed to protect bondholders and lessen the agency problems between bondholders and stockholders. Answer True False 1 points
Question 6 A company with a AAA bond rating will command a higher interest rate on its bonds than a company with a lesser BBB bond rating. Answer True False 1 points
Question 7 Other things held equal, a bond with a call provision is worth more to investors than a bond without a call provision. Answer True False 1 points
Question 8 Bonds generally have a maturity date while preferred stocks do not. Answer True False 1 points
Question 9 In an efficient market, the market value and intrinsic value of a security should be equal. Answer True False 1 points
Question 10 Convertible bonds are debt securities that can be converted into a firm's stock at a prespecified price. Answer True False 1 points
Question 11 Preferred stock is less risky than common stock, but more risky than debt. Answer True False 1 points
Question 2 Junk bonds are also called high-yield bonds. Answer True False 1 points
Question 3 The expected yield on junk bonds is lower than the yield on AAA-rated bonds because of the higher default risk associated with junk bonds. Answer True False 1 points
Question 4 In general, interest on bonds, like dividends on preferred stock, may be deferred until a later date at the discretion of management, making debt financing more appealing to corporate managers. Answer True False 1 points
Question 5 Restrictive provisions in bond indenture agreements are designed to protect bondholders and lessen the agency problems between bondholders and stockholders. Answer True False 1 points
Question 6 A company with a AAA bond rating will command a higher interest rate on its bonds than a company with a lesser BBB bond rating. Answer True False 1 points
Question 7 Other things held equal, a bond with a call provision is worth more to investors than a bond without a call provision. Answer True False 1 points
Question 8 Bonds generally have a maturity date while preferred stocks do not. Answer True False 1 points
Question 9 In an efficient market, the market value and intrinsic value of a security should be equal. Answer True False 1 points
Question 10 Convertible bonds are debt securities that can be converted into a firm's stock at a prespecified price. Answer True False 1 points
Question 11 Preferred stock is less risky than common stock, but more risky than debt. Answer True False 1 points