Question

True or False

(1) Everything else equal, bond price will be higher if investors are demanding a higher return rate.
(2) In general, investors believe bonds are riskier than stocks.
(3) Typically, preferred stocks have voting rights, just like common stocks.

Answer 1

(1) The statement is false. If the investors demand the a higher return rate, then the market interest rate is higher. Market interest rate or the discount rate being higher leads to a lower price.
(2) The statement is false. Investors perceive bonds as less risky, because they pay fixed interest rates even when the company is not making profits. But equity only pay when companies make profits and at times not even then if the company is retaining higher profits.

(3) The statement is false. {Preferred stocks generally dont give voting rights while the equity shares do.