True (or) False questions on coupon rate.
1. Which two securities have the highest and second highest priority of claims on the assets of a company, respectively, from the following list?
- Preferred stock
- Subordinated debenture
- Common stock
- Senior debenture
- Senior secured debt
- Junior secured debt.
a. Preferred stock and common stock
b. Junior secured debt and subordinated debenture
c. Senior secured debt and junior secured debt
d. Senior debenture and subordinated debenture
2. The coupon rate is _____.
a. Stated interest rate divided by a par value.
b. Stated interest rate divided by the current price of the bond.
c. The interest rate that will equate future interest payments and payment at maturity to a current market price.
d. The face value of the bond.
3. Current yield is _____.
a. Stated interest rate divided by a par value.
b. Stated interest rate divided by the current price of the bond.
c. The interest rate that will equate future interest payments and payment at maturity to a current market price.
d. The face value of the bond.
4. The yield to maturity is _____.
a. Stated interest rate divided by a par value.
b. Stated interest rate divided by the current price of the bond.
c. The interest rate that will equate future interest payments and payment at maturity to a current market price.
d. The face value of the bond.
5. The asset of an operating lease will show up on the balance sheet.
a. True
b. False
6. A preemptive right provides current stockholders with the first option to buy new shares.
a. True
b. False
7. Common stock holders do not have the last claim on assets and do not have residual claim to income.
a. True
b. False
8. Preferred stock is a "hybrid" security, because ________.
a. the market price fluctuates as interest rates fluctuate.
b. the yield curve can slope upward or downward.
c. it possesses some of the characteristics of debt and common stock.
d. it pays dividends when the company wants.
9. With the cumulative feature, if preferred stock dividends are not paid in any one year, they accumulate and must be paid in total before debt holders can receive interest.
a. True
b. False
10. American Depository Receipts (ADRs) are certificates that have a legal claim on the ownership interest in a domestic company's common stock.
a. True
b. False