Question

QUESTION 10

Short-term bond yields are generally ______ than long-term bond yields, whereas long-term bond prices are generally ________ than short-term bond prices.

		more volatile, less volatile
		less volatile, more volatile
		less volatile, less volatile
		more volatile, more volatile

2.5 points

QUESTION 11

Common stockholders have a residual claim to income, in other words they are last in line.

True

False

2.5 points

QUESTION 12

Stock classes are similar to bond ratings in that they are used to rank the performance of different corporations' stock.

True

False

2.5 points

QUESTION 13

The particular type of shareholder voting used has become less important with the influence of takeovers, leveraged buy-outs, and other challenges to management control.

True

False

2.5 points

QUESTION 14

Which of the following is not a true statement?

		Common stockholders have a residual claim to income.
		Bondholders may force a corporation into bankruptcy for failure to make interest payments.
		Common stockholders are legally entitled to some dividend.
		A minority interest can still elect members to the Board of Directors under cumulative voting even though someone else owns 51% of the stock.

2.5 points

QUESTION 15

The purpose of cumulative voting is

		to maintain majority control of the board of directors.
		to allow minority stockholders the possibility of a voice on the board of directors.
		to obstruct unfriendly mergers and takeover efforts.
		to prevent the dilution of common stock through preemptive rights offerings.

2.5 points

QUESTION 16

A rights offer made to existing shareholders with the sole purpose of making it more difficult for another firm to acquire the company is called

		a preemptive right.
		a poison pill.
		ex-rights.
		rights-on.

2.5 points

QUESTION 17

A possible advantage to a rights offering is that

		current shareholders are protected against dilution.
		the firm has a built-in market of knowledgeable investors.
		distribution costs are lower than a public offering.
		All of these options

2.5 points

QUESTION 18

Which of the following actions will provide the shareholders with the most total wealth when a company conducts a rights offering?

		Exercise the rights for new shares.
		Sell the rights themselves and hold existing shares and cash.
		Exercise the rights and sell the shares.
		None of these options

2.5 points

QUESTION 19

The subscription rate of a new offering is generally _______ than the rights-on price and _______ than the ex-rights price.

		higher; higher
		higher; lower
		lower; higher
		lower; lower