Bonds

Which type of preferred stock would allow a shareholder to exchange for shares of common stock?

• Cumulative preferred

• participating preferred

• callable preferred

• convertible preferred

A convertible preferred is convertible at $20 per share. The stock is currently selling on a market at 120. Which of the following are correct statements? I. The preferred stock’s conversion ratio is 6. II. The preferred stock’s conversion ratio is 5. III. The common stock must be selling at $24 to be at parity with the preferred stock. IV. The common stock must be selling at $20 to be at parity with the preferred stock.

• I and III

• I and IV

• II and III

• II and IV

If a corporation is highly leveraged, most of its money came from

• Issuing preferred stock.

• Issuing common stock.

• Incurring debt through bonds and bank loans.

• All of the above

A bond quoted at 101 3/8 equals what?

• $1013.75

• $101.38

• $10138.00

• $101.75

Bonds may sell at above or below the par value depending on interest rate fluctuations. These prices are respectively known as.....

• Premium and discount.

• Gain and loss.

• High and low

• Offer and bid.

Which of the following corporate bonds is considered safest for an investor?

• BB-rated secured bond

• AAA-rated unsecured bond

• A-rated secured bond

• A-rated unsecured bond

What happens to the price of existing bonds when the interest rates rise?

• Nothing

• It rises

• Not enough information is provided to make the determination.

• It declines

Which of the following statements best describes bonds?

• Bonds are evidence of ownership in a corporation

• Bonds are junior securities

• Bonds are debt securities

• Bonds are equity securities

A corporate bond is quoted at 103 3/8. What is the dollar price of the bond?

• $1,03.38

• $1,030.37

• $1,033.50

• $1,033.75

The compensation that is paid back for money that is temporarily used by someone borrowing it is called

• Interest

• Payback

• Capital gain

• Accumulation