finance data bank

76. To finance a new line of product, the Tangshan Toys has issued $1,000,000 bond with a par value of $1,000, coupon rate of 8 percent, and maturity of 30 years. Compute the price of the bond if the opportunity cost is 11 percent.

77. The yield to maturity on a bond with a price equal to its par value will

A) be less than the coupon rate.

B) be more than the coupon rate.

C) always be equal to the coupon rate.

D) be more or less than the coupon rate depending on the required return.

78. What is the approximate yield to maturity for a $1,000 par value bond selling for $1,120 that matures in 6 years and pays 12 percent interest annually?

A) 8.5 percent

B) 9.4 percent

C) 12.0 percent

D) 13.2 percent

79. Tangshan Industries has issued a bond which has a $1,000 par value and a 15 percent annual coupon interest rate. The bond will mature in ten years and currently sells for $1,250. Using this information, the yield to maturity on the Tangshan Industries bond is ________.

A) 10.79 percent

B) 11.39 percent

C) 12.19 percent

D) 13.29 percent

80. What is the yield to maturity, to the nearest percent, for the following bond: current price is $908, coupon rate is 11 percent, $1,000 par value, interest paid annually, eight years to maturity?

A) 11 percent

B) 12 percent

C) 13 percent

D) 14 percent

81. Danno is trying to decide which of two bonds to buy. Bond H is a 10 percent coupon, 10-year maturity, $1,000 par, January 1, 2000 issue paying annual interest. Bond F is a 10 percent coupon, 10-year maturity, $1,000 par, January 1, 2000 issue paying semiannual interest. The market required return for each bond is 10 percent. When using present value to determine the prices of the bonds, Danno will find that

A) the money market.

B) the NYSE bond market.

C) retained earnings and the stock market.

D) a private placement with an insurance company as the creditor.

83. Holders of equity capital A) there is no difference in price.

B) the price of F is greater than H.

C) the price of H is greater than F.

D) he needs more information before determining the prices.

82. Equity capital can be raised through

A) own the firm.

B) receive interest payments.

C) receive guaranteed income.

D) have loaned money to the firm.

84. As a form of financing, equity capital

A) has a maturity date.

B) is only liquidated in bankruptcy.

C) is temporary.

D) has priority over bonds.

85. If bankruptcy were to occur, stockholders would have prior claim on assets over

A) preferred stockholders.

B) secured creditors.

C) unsecured creditors.

D) no one.

86. Which of the following terms typically applies to common stock but not to preferred stock?

A) Par value.

B) Dividend yield.

C) Legally considered as equity in the firm.

D) Voting rights.

87. Preferred stock has characteristics of debt since it provides a fixed periodic cash payment.

88. The amount of the claim of preferred stockholders in liquidation is normally equal to the market value of the preferred stock.

89. Cumulative preferred stocks are preferred stocks for which all passed (unpaid) dividends in arrears must be paid along with the current dividend prior to the payment of dividends to common stockholders.

90. Because preferred stock is a form of ownership and has no maturity date, its claims on income and assets are secondary to those of the firm's creditors.

91. One advantage of preferred stock is its ability to increase leverage, which in turn will magnify the effects of increased earnings on common stockholders' returns.

92. Supervoting shares of common stock provide shareholders with ten times the voting power of ordinary shares of common stock.

93. Under the Jobs and Growth Tax Relief Reconciliation Act of 2003, dividends are subject to a maximum tax rate of 20 percent.

94. Under the Jobs and Growth Tax Relief Reconciliation Act of 2003, dividends are subject to a maximum tax rate of 15 percent

95. ________ are promised a fixed periodic dividend that must be paid prior to paying any common stock dividends.

A) Preferred stockholders

B) Common stockholders

C) Bondholders

D) Creditors

96. Dividends in arrears that must be paid to the preferred stockholders before payment of dividends to common stockholders are

A) cumulative.

B) noncumulative.

C) participating.

D) convertible.

97. A firm has issued cumulative preferred stock with a $100 par value and a 12 percent annual dividend. For the past two years, the board of directors has decided not to pay a dividend. The preferred stockholders must be paid ________ prior to paying the common stockholders.

A) $ 0/share

B) $12/share

C) $24/share

D) $36/share

98. A firm has an outstanding issue of 1,000 shares of preferred stock with a $100 par value and an 8 percent annual dividend. The firm also has 5,000 shares of common stock outstanding. If the stock is cumulative and the board of directors has passed the preferred dividend for the prior two years, how much must the preferred stockholders be paid prior to paying dividends to common stockholders?

A) $ 8,000

B) $16,000

C) $24,000

D) $25,000

99. An ADR is

A) a claim issued by a U.S. bank representing ownership of shares of a foreign company's stock held on deposit by the U.S. bank and is issued in dollars to U.S. investors.

B) a claim issued by a foreign bank representing ownership of shares of a foreign company's stock held on deposit by the foreign bank and is issued in dollars to U.S. investors.

C) a claim issued by a U.S. bank representing ownership of shares of a U.S. company's stock held on deposit by the U.S. bank and is issued in dollars to U.S. investors.

D) none of the above.

100. Preferred stockholders

A) do not have preference over common stockholders in the case of liquidation.

B) do have preference over bondholders in the case of liquidation.

C) do not have preference over bondholders in the case of liquidation.

D) Two of the above are true statements.