Common stocks for which of the following industries are most likely to decline in value when interest rates rise?
Answer(s): D
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:
Answer(s): C
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.
Bubba buys a 5% bond that matures in 15 years with a 5.10 basis. How much did he pay for the bond?
Answer(s): B
98.96. A calculator is not required for this. Even Bubba knows the bond is obviously trading at a slight discount by yielding 5.10% instead of the coupon rate of 5%. If the yield was the same as the coupon rate, the price is 100.00.
Bonds are most often quoted as a percentage of:
Answer(s): A
face value. The price is 100.00 if the yield is the same as the coupon rate. A price of less than100.00 means the yield is higher than the coupon rate. A price of more than 100.00 means the yield is lower than the coupon rate. The prices are a percentage of 100.00. However, treasury bonds and municipal bonds are not quoted in this way.
Which of the following is a right for shareholders of common stock?
the right to vote about important matters of the company. Shareholders have no expectation of stock price increase or dividends. They are entitled to receive dividends only if the board of directors declares them.
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