As a bond approaches maturity, the price of the bond will approach its par value until, the bond is worth its face value at maturity. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
The amount of preferred stock dividends that must be paid each year may be stated in dollars or as a percentage of the firm’s earnings. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
What is the dividend on an 8 percent preferred stock that currently sells for $45 and has a face value of $50 per share? A) $3.33 B) $3.60 C) $4.00 D) $5.00 ANSWER C
Date: September 19th, 2020
The three major cash flow components include the initial investment, operating cash flows, and terminal cash flow. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
The less fixed-cost debt (financial leverage) a firm uses, the greater will be its risk and return. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
IBM stock will experience greater trading activity (in terms of the number of shares traded on a given day) compared to IBM bonds. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
The three major cash flow components include the initial investment, nonoperating cash flows, and terminal cash flow. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
The cost of preferred stock is typically higher than the cost of long-term debt (bonds) because the cost of long-term debt (interest) is tax deductible. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
The cost of preferred stock is the ratio of the preferred stock dividend to a firm’s total earnings. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
In general, the more debt a firm uses, the smaller its financial leverage. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
