CHAPTER 7 QUESTIONS 1. What is equity? What are some characteristics of equity? a. Explain the following statement: "Whereas a bond contains a promise to pay interest, common stock provides an expectation but no promise of dividends." b. What is the significance of the par value of a preferred stock? Of a common stock? 2. How are stock prices determined? 3. How are stock returns determined? What two components are included in a stock's return? 4. What factors affect stock prices? Explain. 5. What alternative techniques do investors use to value stocks? Why