Question
Jack invests in corporate bonds issued by MoMi Bro & Co., and Jill invests in corporate equity issued by MoMi Bro & Co.. Because both
Jack invests in corporate bonds issued by MoMi Bro & Co., and Jill invests in corporate equity issued by MoMi Bro & Co.. Because both Jack and Jill are investing in the same company, they would bear the same risk and expect to earn the same returns.
True/false
Which of the following statements regarding the features of debt and equity is NOT correct?
Even if I only invest in one share of Amazon's stock, I am a owner of the company. | ||
As an Amazon stock investor, I have the rights to elect directors, who monitor managers. I would also have the rights to vote on important corporate issues such as mergers and acquisitions. | ||
When Amazon raises new equity, the managers could issue stocks to local banks or the public equity market. Because local banks know better about the company than the general public, they as equity investors may have stronger cash flow rights than other investors, including the debt investors and the equity investors who bought Amazon stocks from the public equity market. | ||
As an investor in corporate equity, one could lose everything when the company is in financial trouble. |
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