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Which of the following statements is true? A. An advantage of stocks is that you will...

Which of the following statements is true?
  • A. An advantage of stocks is that you will always receive dividends
  • B. A debenture is a bond that is secured by collateral
  • C. Treasury Inflation-Protected Securities (TIPS) help protect against loss of purchasing power
  • D. The higher the rating of a firm the greater the interest rate its bonds pay
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Answer #1

Answer: C. Treasury Inflation-Protected Securities (TIPS) help protect against loss of purchasing power

Statement A is incorrect. A stock may or may not pay dividend. This depends upon the performance of the company in particular year, as well as need to conserve capital for future projects.

Statement B is incorrect. A debenture is a bond that is unsecured obligation.

Statement D is incorrect. Higher the rating of the firm, lower is its risk or porbability of default and hence lower would the interest rate or yield on that bond be.

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