True or False?

Preferred stock dividends are paid after interest but before dividends to common stock? T or F

Preffered stock dividends are not a tax deductible expense for the firm? T or F

Preferred stock dividends are usually fixed? T or F

Generally, convertible bonds lack a call provision? T or F

If a $1000 convertible bond may be converted into 25 shares, the exercise price is $50 a share? T or F

When a convertible bond is called, the bondholder must convert the bond or lose the appreciateion achieved by the stock? T or F

Multiple Choice

Preferred stock and bonds are similar because:

a. they both have voting power

b. interest and dividend payments are legal obligations

c.neither interest nor dividends are tax deductible

d. both are a source of financial leverage

Which of the following is not equity?

a. paid-in capital

b. retained earnings

c. preferred stock

d. debentures

If interest rates increase,

a. the prices of bonds and preferred stock increase

b. the price of bonds increases but the price of preferred stock decreases

c. the prices of bonds and preferred stock decline

d. the price of bonds decreases but the price of preferred stock increases

Which of the following bonds is supported by collateral?

a. convertible bonds

b. income bonds

c. equipment trust certificates

d. debentures