Although a corporation has no earnings in a particular year, it is obligated to pay interest on all its outstanding debt except the following:
Answer(s): C
adjustment bonds. These bonds are also known as income bonds. Interest is paid only if there is income.
Interest rates rise from 5.10% to 5.30%. For a prospective buyer of five $1,000 bonds, what is the increase in interest payments as a result of the rise?
Answer(s): D
$10. Interest rates increased by 20 basis points. One basis point is 10 cents. So 20 basis points is $2. But…since there are five bonds, that $2 x 5 = $10.
Common stocks for which of the following industries are most likely to decline in value when interest rates rise?
public utility companies. Interest rates most affect the companies with the greatest amount of debt. Public utility companies are highly leveraged. Hence, they most likely incur the largest effect of rising interest rates.
Convertible preferred stock has all of the following characteristics except:
a requirement for shareholders to always accept the call price when called. All of the other statements are true “except” this one. Convertible preferred shareholders have a n opportunity to convert to common stock. There is no forced call price.
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