Final Exam Study Guide APHY 101 Ivy Tech Questions and Answers (Verified Answers)<\/p>\n\n\n\n
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WGU C214 Financial Mgmt Pass the OA
1.Characteristics of preferred stock includes: -dividends in arrears
-dividends are cumulative
-higher payoff claim in a BK (has first dibs in a BK)
-considered “hybrid” (part stock\/part bond)
-no fixed maturity date
-no voting rights
-can skip dividend payments
-dividends don’t change year-after-year
-used in start ups (IPO)
2.Preferred stock dividends: can go without payment and pay in
arrears the following year
3.Characteristics of common stock are: -voting rights
-no maturity date
-corporate governance
-lower payoff claim in BK
-variable returns
-unlimited earnings potential<\/p>\n\n\n\n
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-earnings are in dividends & the increase in price of stock
4.New start up ventures often issue: preferred stock (in an IPO)
5.What stock is considered a hybrid: preferred stock
6.One thing common stock and preferred stock have in common is:
both have no maturity date
7.Which type of security has voting rights: common stock
8.Debt covenants and restrictions help to ensure that: management is
meet- ing bond and shareholder expectations
NOTE: covenants are promises meant to be kept
9.What is true regarding bonds: -when bond matures, bondholder gets
lump sum back
-coupon rate doesn’t change
-maturity is in years
-PAR value is typically $1000
-Future value (same as PAR) is typically $1000
10.Bond sells at face value when: required rate of return is equal to the
coupon rate
11.Why are bonds the primary method for raising capital: because<\/p>\n\n\n\n
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bonds remove the intermediary costs<\/p>\n\n\n\n
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NOTE: IPO’s require an intermediary known as a syndicate – a group
of banks underwriting the security issue
12.What type of bond can be traded for stock: convertible bonds
13.What is the interest rate for annual payments of a bond known as:
the coupon rate
NOTE: coupon rate is the established interest rate for the life of the
bond and will remain unchanged
14.Coupon rate is the established rate of the bond and should: never
change
15.Debentures are: secured bonds
NOTE: debentures are a debt instrument (bond) issued to raise cash,
secured against a company’s assets and backed by credit,
transferable by the holder, and may also be unsecured
16.Secured loan: has collateral like a mortgage
17.The amount repaid at the expiration date of a bond is: PAR value
NOTE: expiration date is also known as maturity date PAR (or Face
Value) is typically $1000
18.Duration measures: the market risk of a bond and is the percentage
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