11. As interest rates and consequently investors required rates of return change over time, the ____________ of outstanding bonds will also change.

a. maturity date

b. coupon interest payment

c. par value

d. price

12. Common stockholders expect greater returns than bondholders because:

a. they have no legal right to receive dividends.

b. they bear greater risk.

c. in the event of liquidation, they are only entitled to receive any cash that is left after all creditors are paid.

d. all of the above.

13. Which of the following statements is true?

a. Common stockholders are the true owners of a firm.

b. Capital obtained from the sale of common stock will ultimately be repaid by the corporation.

c. A corporation has a legal obligation to pay dividends on common stock.

d. Dividends on common stock usually do not grow.

14. Preferred stockholders:

a. have a right to receive dividends before common stockholders.

b. normally have voting rights.

c. generally receive a dividend that varies with the financial performance of the firm.

d. are secured creditors.

15. The XYZ Company, whose common stock is currently selling for $40 per share, is expected to pay a $2.00 dividend in the coming year. If investors believe that the expected rate of return on XYZ is 14%, what growth rate in dividends must be expected?

a. 5%

b. 14%

c. 9%

d. 6%