Bond Valuation

Question 1

A debt obligation is considered secured, if creditors have

Answer 1

recourse to the assets of the company on a proprietary basis or otherwise ahead of general claims against the company.

Question 2

The equity, or capital stock (or stock) of a business entity represents

Answer 2

the original capital paid into or invested in the business by its founders.

Question 3

Preferred Stock:

Answer 3

Stock with a dividend, usually fixed, that is paid out of profits before any dividend can be paid on common stock and that has priority to common stock in liquidation.

Question 4

Common stock:

Answer 4

Shares of an ownership interest in the equity of a corporation or other entity with limited liability entitled to dividends, with financial rights junior to preferred stock and liabilities.

Question 5

Par value:

Answer 5

The amount or value listed on a bill, note, stamp, etc.; the stated value or amount.

Question 6

In the first stage, a new company’s external financing needs (EFN) are high, since it needs money to develop its idea but lacks retained earnings. They are usually financed through

Answer 6

debt, but may find investors who are willing to take on risk if projected growth is high.

Question 7

Which statement accurately describes a shareholder’s preemptive rights?

Answer 7

The right to retain their proportional ownership in a company should it issue another stock offering - The term “preemptive right” is specific to the right to purchase additional shares before they are made available to the public.

Question 8

Which answer is not a benefit associated with common stock?

Answer 8

Guaranteed dividends: Common shareholders do not get guaranteed dividends, so their returns can be uncertain.

Question 9

Which feature is generally not associated with preferred stock?

Answer 9

Corporate shareholders are prohibited from casting their vote online. Proxy voting allows shareholders to vote when they can’t attend a shareholder meeting.

Question 10

Which answer is not a true statement regarding voting rights?

Answer 10

Variable dividend amounts - Preferred Stock is stock with a dividend, usually fixed, that is paid out of profits before any dividend can be paid on common stock. Preferred dividends are fixed.

Question 11

Which answer is generally not a right granted to owners of preferred shares?

Answer 11

Variable dividend amounts - Preferred Stock is stock with a dividend, usually fixed, that is paid out of profits before any dividend can be paid on common stock. Preferred dividends are fixed.