Question

7. Which of the following is TRUE?

1. Stock prices should fall by the amount of the dividend on the Payment Date.
2. Large shareholders prefer cumulative voting
3. Companies issue rights to existing shareholders to prevent dilution
4. All of the above are true

8.              Which of the following statements is TRUE?

a.              Owners of preferred stock have greater voting rights than common shareholders.

b.              In case of bankruptcy, preferred stock gets paid before common stock

c.              Companies are more likely to issue preferred stock if they have a high tax bracket because dividends tax deductible.

d.              All of the above are true

_____________ may force the company to buy back some of the bonds every year until maturity.

1. Callable Bonds
2. Debentures
3. Floating Bonds
4. Sinking Funds

Answer 1

7)It is option D
option A is correct since when the dividend is paid on the date the share price comes down by same amount
option B correct since cummulative voting the no of voted they have is multiplication of shares they hold*no of positions votings is for and this no will be high compared to straight voting
option C is correct as this will not have any dilution and if they give rights to new shareholders then there is dilution

8)Option B is correct
Option A incorrect since they do not have any voting powers
Option C is incorrect since they do not have any tax advantage as they paid from after tax profits

9)Option A