Question

27. The _________________________ rate of interest is typically the required rate of return on a three-month U.S. Treasury bill.

A) nominal

B) real

C) risk-free

D) premium

2) TRUE/FALSE The questions below

A)Preferred stock has a characteristic of debt financing since it provides a fixed, periodic cash payment.

B) Common stock gives the holder voting rights which permit selection of the corporation's Board of Directors.

C) The Gordon constant growth stock model is an approach to stock valuation that assumes that dividends grow at a constant annual rate (g) indefinitely.

D) In the case of liquidation, common stockholders are paid first, followed by preferred stockholders followed by bondholders.

Answer 1

option c is the correct option for 27(1),(c) risk free rate. treasury bill are free from risk. It is the minimum rate receivable at any bond type.

27(2) (a) answer is true. For taking financial leverage preferred stock behave like debt fiancing due their character of fixed rate of interest.

(b) true, common stock holders are the owner of the entity and have voting rights to choose the Board of dirrects to mange the compnay.

(c) Ture

(d) false, common stock holders are the owner of the firm but in liquidation they are paid at the end of the residual value.