Why is the return associated with common stock referred to as a residual claim? Contrast this kind of claim with a fixed claim

Q: What is not a variable in Boundary Conditions? a) underlying stock price at expiration b) exercise…

A: The option contracts is a derivative contract which provides a right to buy or sell a security on a…

Q: Does the component cost of preferred stock include or excludeflotation costs? Explain

A: Preferred Stock: The stock that has no right over the decision making of the company against which…

Q: The preemptive right allows common stockholders to:

A: The Preemptive right allows common stockholders to :  maintain a proportionate share of ownership in…

Q: What’s the difference between a stock’s current market price and its intrinsic value?

A: Stock Current market price is the price at which the stock traded in the market.   Intrinsic value…

Q: What are some advantages and disadvantages of stockrepurchases?

A: Answer: Stock repurchases is nothing but the allocation of profits by a corporation to owners by…

Q: In theory, only systematic risk matters for the required return of a stock. Why does non-systematic…

A: Systematic risk refers to those which impacts the whole market rather than on particular stock…

Q: What are the advantages of using restricted stock to compensateemployees?

A: Restricted stock are the shares of a company, which is issued to its employees, but not entirely…

Q: How are unrealized gains/losses on trading securities recorded?

A:

Q: What is the effect of a company electing the fair value option with respect to a held-to-maturity…

A: Held-to-maturity security: The debt securities which are held by the investor with an intent to hold…

Q: hat is Return on Equity (ROE), and why is it important?

A: The ratio refers to a measure used by the companies and investors to determine the company's…

Q: Why are holding gains and losses treated differently for trading securities and securities…

A:

Q: What are the similarities and differences in equity valuation and bond valuation?

A: Bonds: Bonds are a debt instrument on which interest is paid. They can be issued at a discount/par…

Q: Does the if-converted assumption apply only to diluted earnings per share? O A. The if-converted…

A: If-converted assumption is used to calculate value of converted debenture or preference share,if…

Q: How does a dividend payment impact the option price?

A: The option price(call and put) is impacted by the new information about the announcement of the…

Q: explain whether true or false : The interest rate parity does hold in realty

A: Interest rate parity is an releationship between spot exchange rate and the forward exchane rate…

Q: Explain why common stock is itself like a call option. What plays the role of the exercise price and…

A: There are two types of options in the market: call options and put options.  Call options allow the…

Q: Which of the following is not a defining feature of common stock? a residual claim on assets voting…

A: Common stock: The common stock is considered as a security that signifies proprietorship in a…

Q: Define stock purchase right

A: Stock purchase rights  are generally issued by a company if they have more amount of debt in which…

Q: It is the board that decides whether a dividend is to be paid or not select an option False True

A: Dividends are payments provided to a corporation’s shareholders when the company makes a profit.…

Q: Under which circumstances can the speculator gain a profit and what is the risk of carry trades?

A: The big risk in a carry trade is the uncertainty of exchange rates. Using the example above, if the…

Q: What is the fair value option? Where do companies thatelect the fair value option report unrealized…

A:

Q: Which of the following is true about stock- based compensation? (check all that apply) Stock-based…

A: A stock option is an employee compensation scheme in which, company’s equity stocks are offered to…

Q: Stock appreciation right would normally be settled through

A: Second option is wrong because stock appreciation right is not settled through issue of share…

Q: If a stock’s market value exceeds its book value, then the stock is overpriced. Do you agree?…

A: Market value depends on a lot of factors such as 1. Potential future earnings 2. Non Tangibles which…

Q: Why are the probabilities of stock price movements not used in the binomial model for calculating an…

A: The binomial option pricing framework was established in 1979 as a technique for valuing options.…

Q: How is the adjustment to fair value recorded differently for a cash flow hedge versus a fair value…

A: Hedge Hedge is simply called financial instrument which can be reduce the mitigation of risk which…

Q: Why are unrealized gains and losses on trading securities reported in the incomestatement?

A: Unrealized gains and losses: Trading securities are reported at their fair values. Unrealized gains…

Q: How do restricted stock awards differ from restricted stock units (RSUs)?

A: Restricted stock: Restricted stock is the portion of shares held up by the management, to be issued…

Q: Why is premium on issue of debentures considered a capital profit?

A: Debenture: Debenture is a type of debt instrument and it is unsecured by collateral. Since,…

Q: How is the intrinsic value of the call option impacted as the stock price changes? How is the time…

A: 1) Intrinsic value of a call option for a trader is the current value of the option. It is the…

Q: How does equity valuation differ from bond valuation

A: The term equity valuation refers to all the methods and techniques used by the investors to compute…

Q: Explain return on common equity (ROE)

A: Return on equity is calculated by dividing the net profit by shareholder's equity. Shareholders'…

Q: True or False: When stock is issued for more than its par value, the excess is considered to be an…

A: Additional paid-in-capital can be defined as the extra amount received from the investor for an…

Q: How is the value of a stock determined? What are the critical factors that are examined throughout…

A: The Answer :

Q: at is the partial equity metho

A: Partial equity method: The partial equity method may be a compromise between the initial value…

Q: Explain and discuss the preemptive right of common stockholders. Is this fair? Why or why not?

A: Common stockholders are actually the real owners of the corporation or company. Preemptive right is…

Q: The fair value of a stock can be determined by the factors of market forces Select one: a. True…

A: Fair value of stock is its fundamental value. It is the intrinsic value of the stock and does not…

Q: circumstance the Dividend Discount Model (DDM) cannot be used to determine the price of a stock

A: Dividend discount model It is generally utilized by investors for the measurement of the value of…

Q: Explain how electing the fair value option affects accounting for investments.

A: The fair value option provides the business the option to record the financial instruments at fair…

Q: The pre-emptive right of a common stockholder is the right to?

A: Preemptive Right Preemptive Right are defined as the rights which are giving only to the early…

Q: The Valuation Principle states that the value of a stock is equal to the present value​ (PV) of both…

A: The value of share is much similar to the value of bond. In both future cash flows are discounted…

Q: What is stock split? Distinguish between a bonus issue and a stock split.

A: Stock Split Means: it refers to that a company divides its existing share into multiple shares or a…