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Stock Dividend

True or false questions.

1. If interest rates rise after a bond is issued, the yield to maturity will exceed the current yield.
2. Equipment trust certificates issued by a firm are safer than its debentures.
3. Income bonds are the safest bonds issued by a firm.
4. A period payment to retire a debit is illustrative of a sinking fund.
5. An investor may anticipate that a bond will be called if interested rates have risen.
6. Preferred stock dividends are not a tax deductible expense for the firm.
7. One measure of the safety of a preferred stock's dividend is the ratio of dividends to earnings before interest and taxes.
8. A constant payout ration implies dividends vary with earnings.
9. A. Stock dividend has no impact on a firm's liabilities or the price of its stock.
10. A stock dividend decreases retained earnings.

Solution Preview

1. If interest rates rise after a bond is issued, the yield to maturity will exceed the current yield.
False, Price will go down
http://www.investopedia.com/articles/03/110503.asp.

2. Equipment trust certificates issued by a firm are safer than its debentures.
True, As in US debentures are considered to be unsecured
...

Solution Summary

Response discusses the Stock dividend

$2.19