IFM10 Ch 20 Test Bank
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IFM10 Ch 20 Test Bank

Course Number: BA 462, Spring 2010

College/University: Humboldt State University

Word Count: 2504

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CHAPTER 20 HYBRID FINANCING: PREFERRED STOCK, WARRANTS, AND CONVERTIBLES (Difficulty: E = Easy, M = Medium, T = Tough) True/False Easy: (20.1) Preferred stock Answer: b Diff: E 1 . The "preferred" feature of preferred stock means that it normally will provide a higher expected return than will common stock. a. True b. False (20.1) Cost of preferred stock Answer: a Diff: E 2 . Unlike bonds, the cost of...

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20 CHAPTER HYBRID FINANCING: PREFERRED STOCK, WARRANTS, AND CONVERTIBLES (Difficulty: E = Easy, M = Medium, T = Tough) True/False Easy: (20.1) Preferred stock Register to View AnswerDiff: E 1 . The "preferred" feature of preferred stock means that it normally will provide a higher expected return than will common stock. a. True b. False (20.1) Cost of preferred stock Register to View AnswerDiff: E 2 . Unlike bonds, the cost of preferred stock to the issuing firm is the same on a before-tax and after-tax basis. This is because dividends on preferred stock are not tax deductible, whereas interest on bonds is deductible. a. True b. False (20.2) Warrants Register to View AnswerDiff: E 3 . A warrant is an option, and as such it cannot be used as a "sweetener." a. True b. False (20.2) Warrants Register to View AnswerDiff: E 4 . A warrant holder is not entitled to vote, but he or she does receive cash any dividends paid on the underlying stock. a. True b. False (20.2) Warrants Register to View AnswerDiff: E 5 . The problem of dilution of stockholders earnings never results from the sale of call options, but it can arise if warrants are used. a. True b. False Chapter 20: Hybrid Financing Page 1 (20.2) Detachable warrant Register to View AnswerDiff: E 6 . A detachable warrant is a warrant that can be detached and traded separately from the bond with which it was issued. Most traded warrants are originally attached to bonds or preferred stocks. a. True b. False (20.3) Convertibles Register to View AnswerDiff: E 7 . The owner of a convertible bond owns, in effect, both a bond and a call option. a. True b. False (20.3) Convertibles Register to View AnswerDiff: E 8 . A convertible debenture can never sell for more than its conversion value or less than its bond value. a. True b. False (20.3) Convertibles A

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Humboldt State University - BA - 462
Test Bank where all the test Q come from
Humboldt State University - BA - 462
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Humboldt State University - BA - 462
CHAPTER 23 OTHER TOPICS IN WORKING CAPITAL MANAGEMENT(Difficulty: E = Easy, M = Medium, and T = Tough)True-False Medium:(23.2) Target cash balance Answer: b Diff: M 1 . The cash balances of most firms consist of transactions, compensating, precautionar
Humboldt State University - BA - 462
CHAPTER 24 DERIVATIVES AND RISK MANAGEMENT(Difficulty: E = Easy, M = Medium, and T = Tough)True/False Easy:(24.1) Risk management Answer: a Diff: E 1 . One objective of risk management can be to reduce the volatility of a firms cash flows. a. True b. F
Humboldt State University - BA - 462
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Humboldt State University - BA - 462
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Humboldt State University - BA - 462
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study notes for test 2
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