A corporation can raise money by selling stocks and/or bonds. From an investor's perspective, what is the difference between a bond and stock? O 1. If an investor owns a corporate bond, the investor owns a part of the company. O 2. A corporation guarantees interest payments to a bond investor but does not guarantee dividend payments to stock investor. O 3. A corporation guarantees dividend payments to a stock investor but does not guarantee interest payments to bond investor. O4. Stocks can appreciate in value, bonds do not change value. A corporation can raise money by selling stocks and/or bonds. From an investor's perspective, what is the difference between a bond and stock?O1, If an investor owns a corporate bond, the investor owns a part of the companyOZA corporation guarantees interest payments to a bond investor but does not guarantee dividend payments to stock investor3.A corporation guarantees dividend payments to a stock investor but does not guarantee interest payments to bond investor.4 Stocks can appreciate in value, bonds do not change value.

So from the investor perspective when there is decision regarding investment in the bonds or…

, the investor owns a part of the company. O 2. A corporation guarantees interest payments to a bond investor but does not guarantee dividend payments to stock investor. O 3. A corporation guarantees dividend payments to a stock investor but does not guarantee interest payments to bond investor. O4. Stocks can appreciate in value, bonds do not change value.

, the investor owns a part of the company. O 2. A corporation guarantees interest payments to a bond investor but does not guarantee dividend payments to stock investor. O 3. A corporation guarantees dividend payments to a stock investor but does not guarantee interest payments to bond investor. O4. Stocks can appreciate in value, bonds do not change value.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter9: Long-term Liabilities

Section: Chapter Questions

Problem 16MCQ

See similar textbooks

Similar questions

Finance A corporation can raise money by selling stocks and/or bonds. From an investor's perspective, what is the difference between a bond and stock? O 1. If an investor owns a corporate bond, the investor owns a part of the company. O 2. A corporation guarantees interest payments to a bond investor but does not guarantee dividend payments to stock investor. O 3. A corporation guarantees dividend payments to a stock investor but does not guarantee interest payments to bond investor. O4. Stocks can appreciate in value, bonds do not change value.
A. Stockholders can transfer wealth from bondholders. As a finance analyst, you are required to explain how the following actions by stockholders transfer wealth from bondholders. Again, in what ways can the bondholders protect themselves against these actions?i. An increase in dividendsii. A leveraged buyoutiii. Acquiring a risky business B. Why might the two (2) disciplinary mechanisms of shareholders against managers not work? C. Union Pacific Rail road reported net income of $770million after interest expenses of $320 million in a recent financial year. The corporate tax rate was 36%. It reported depreciation of $960 million in that year, and capital spending of $1.2billion. The firm also had $4billion in debt outstanding on the books, was rated AA (carrying a yield to maturity of 8%), and was trading at par (up from $3.8 billion at the end of the previous year). The beta of the stock is 1.05, and there were 200 million shares outstanding (trading at $60 per share), with a book…
Companies, and governments can all borrow money using bonds. But only corporations have stockholders. Why is that?
Which of the following statements is most correct? Group of answer choices Money market transactions include common stock transactions. Preferred stockholders are paid before bondholders but after common stockholders. One of the problems in corporations is that managers often put their own interests ahead of those of the stockholders. U.S. T-bills are considered risky securities. None of the above statements is correct.
Corporations often offer ________ to investors as some tangible evidence that the corporation is doing well, and the investor is getting something from his or her money. 1.shares of stock 2.dividends 3.trusts 4.index funds
You are the CFO of a company that is considering issuing its first bond issue to the public. You have been asked to present a few matters related to debt (bond) financing to the board of directors. Please briefly explain to the board: (1) the usual collateral position of bondholders (lenders) versus equity investors, (2) why common stockholders can demand a higher rate of return than lenders, and (3) why you would suggest debt (or equity) financing.
A corporation might have treasury stock listed on their financials for all the following reasons except: A. they wish to control the market price B. they wish to be a majority stockholder C. they wish to limit dividend payments D. they wish to avoid takeover
1. An advantage to a corporation of issuing bonds rather than issuing stock or borrowing from a bank include(s) a. All of the below are true b. Interest on bonds is tax deductible, but dividends are notc. Bondholders have no voting rights or ownership of the corporationd. Bank lenders often demand a huge amount of annual information and place onerous restrictions on the business
when are corporations likely they called the Bonds? A. When the market interest rate is higher than the contract rate, b. When the contract rate is higher than the market rate. C. When their bonds at selling at par with market d. When standard and poor are bullish about treasury bills E. None of the above
Stockholders can transfer wealth from bondholders through a variety of actions. How would the following actions by stockholders transfer wealth from bondholders? An increase in dividends A leveraged buyout Acquiring a risky business How would bondholders protect themselves against these actions?
Which of the following statements is NOT true of PIPE transactions? In a PIPE transaction, investors purchase securities (equity or debt) directly from a publicly traded company in a private placement. PIPE transaction gives issuers faster access to capital. The securities are virtually always sold to the investors at a discount to the price at which they would sell in the public markets. PIPE transactions are registered with the SEC.
Which of the following are differences between a bond and a common stock? (Select all that apply.) A. A corporation has to pay all bondholders before paying stockholders. B. A bond is a claim on the earnings and assets of a corporation, whereas a common stock promises to make periodic payments for a specified period of time. C. A corporation has to pay all stockholders before paying bondholders. D. A bond is a debt instrument that entitles the owner to receive periodic amounts of money until its maturity date, whereas a common stock represents a share of ownership of the institution that has issued the stock.