Question

Hello,

Can you help with the multi question?

Question 1a)

Which of the following statements are correct?

Stock is a form of debt capital.

Stock must be repaid at maturity.

Interest payments to bondholders are at the discretion of the corporation.

Bonds do not have to be repaid at maturity.

Bonds are a form of debt capital.

B) which of the following statements is false?

Treasury securities maybe be purchased through banks or brokers.

Most individual investors that purchase treasury bills, notes, and bonds bid competitively.

Federal government treasury securities offer lower interest rates then corporate bonds.

Federal government securities carry a reduced risk of default when compared to corporate securities.

The federal government sells bonds and securities to finance both the national debt and the government on going activities.

C) Which of the following statements is true?

in bond quotations, prices are given as percentage of the bond's value.

To find the market price of a corporate bond, you must contact the corporation that originally issued the bond.

To find the market price of a corporate bond, you must call a stockbroker.

All local newspapers contain information of bond prices

The face value of most corporate bonds is $5,000

Thanks,

Answer 1

A]

The 1st statement is incorrect - stock is a form of equity capital

The 2nd statement is incorrect - stock does not have maturity

The 3rd statement is incorrect - Interest payments are mandatory, and not discretionary

The 4th statement is incorrect - Bonds are repayable at maturity

The 5th statement is correct - Bonds are debt capital as they have to be repaid at maturity, and the periodic interest payments are mandatory

B]

The 1st statement is correct - Treasury securities can be purchased through banks or brokers, among others.

The 2nd statement is incorrect - Treasury securities are sold through competitive bidding to institutional investors.

The 3rd statement is correct - Treasury securities are risk free, and hence offer lower yields.

The 4th statement is correct - Treasury securities are free from default risk as they are issued by the full faith and credit of the US government, whereas corporate bonds have default risk.

The 5th statement is correct - Treasury securities are sold for both national debt and to fund revenue activities.

C]

The 1st statement is correct - bond prices are quoted as a % of their face value.

The 2nd statement is incorrect - market prices are published by various sources such as financial information companies, news websites, brokers, newspapers etc.

The 3rd statement is incorrect - market prices are published by various sources such as financial information companies, news websites, brokers, newspapers etc.

The 4th statement is incorrect - market prices are published by various sources such as financial information companies, news websites, brokers, newspapers etc.

The 5th statement is incorrect - face value of most corporate bonds is $1000