One often finds that a company’s bonds have a higher yield than its preferred stock, eventhough an investor considers the bonds to be less risky than the preferred. What causes thisyield differential?
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One often finds that a company’s bonds have a higher yield than its preferred stock, even
though an investor considers the bonds to be less risky than the preferred. What causes this
yield differential?
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- Historical evidence indicates that stocks Seleccione una: a. underperform bonds. b. outperform bonds. C. Are less risky than bonds. d. have the same return as bonds.Which of the following statements is CORRECT? a. Convertible bonds generally have lower coupon rates than non-convertible bonds of similar default risk because they offer the possibility of capital gains. b. A debenture is a secured bond that is backed by some or all of the firm's fixed assets. c. Junk bonds typically provide a lower yield to maturity than investment-grade bonds. d. A company's subordinated debt has less default risk than its senior debt. e. Senior debt is debt that has been more recently issued, and in bankruptcy it is paid off after junior debt because the junior debt was issued first.If the credit quality of the issuer falls sharply, what is your main concern? a.The share price. b.The volatility of the underlying c.The default risk. d.A rise in risk free interest rates Give typing answer with explanation and conclusion
- As a bondholder, what risks would you face, and how are these risk factors lower for bonds than they are for stock?If a firm increases its financial risk by selling a large bond issue that increases its financial lewverage explain this assumption?Also what is the relationshipbetween risk and return. Explain with examples bold examples.It's important for investors to understand what a stock's yield is and why it matters. Define and explain what a bond yield means. Where do bond investors differ from stock investors? What do they have in mind that's different? If a common dividend is not paid, what choices do investors have? What alternatives are available to bondholders if interest payments are not made?
- Explain whether the following statements are true or false. Justify your answer and solve both the parts of this question. a) The income from bond is more uncertain compared to the income from shares b) Managers want to maximize the intrisic value of the stock not the market price of the stock.Briefly describe why investors should buy high-quality (non-speculative) bonds based on yield-to-maturity rather than price. Shouldn't wise investors choose the lowest priced bonds they can find with suitable risk? Your Answer:A corporate bond's return becomes less uncertain as default risk increases. True or False. Explain your answer
- How do stocks and bonds differ in terms of the future payments that they are expected to make? Which type of investment (stocks or bonds) is considered to be more risky? Given what you know, which investment (stocks or bonds) do you think commonly goes by the nickname “fixed income”?which of the below has a negative correlation with the return on bonds ? a. Taxability b. Default risk c. Callable bonds d. Liquidity e. DebentureThe yield to maturity of a company’s bonds can be higher than its cost of preferred stock TRUE FALSE