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5. Preferred shareholders are considered first claimants whereas common stock holders are residual claimants. 6. The relationship between the coupon rate and the bond price
5. Preferred shareholders are considered first claimants whereas common stock holders are residual claimants. 6. The relationship between the coupon rate and the bond price is always negative. 7. The present value of a perpetuity is simply the fixed payment divided by the discount rate. Thus, one can argue that it does not take into account all future payments. 8. The yield to maturity is preferred to the rate of return since it takes into account the time value of money
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