What are the three basic types of securities that are issued by corporations? Put in plain words the key rights for common stock ownership and how these rights benefit the shareholders.© BrainMass Inc. brainmass.com October 25, 2018, 7:00 am ad1c9bdddf
What are the three basic types of securities that are issued by corporations?
The three types are common stock, preferred stock, and bonds. Common stock is described below. Preferred stock gets their dividends before common shareholders, if any are declared. However, their dividend is subject to a maximum amount. Bonds are loans that are securitized (made into small standardized pieces approved by SEC for sale to the public) that are issued for a set number of years and pay ...
Your tutorial is 271 words and describes all three types of securities and the benefits of owning common stock.
Separation of ownership and management, shareholder goals, bonds, interest
Problem 1-6: In most large corporations, ownership and management are separated. What are the main implications of this separation?
Problem 1-8: We can imagine the financial manager doing several things on behalf of the firm's stockholders. For example, the manager might:
a. Make shareholders as wealthy as possible by investing in real assets.
b. Modify the firm's investment plan to help shareholders achieve a particular time pattern of consumption.
c. Choose high- or low-risk assets to match shareholders' risk preferences.
d. Help balance shareholders' checkbooks.
But in well-functioning capital markets, shareholders will vote for only one of these goals. Which one? Why?
A. The cost of an automobile is $10,000. If the interest rate is 5%, how much would you have to set aside now to provide this sum in five years?
B. You have to pay $12,000 a year in school fees at the end of each of the next six years. If the interest rate is 8%, how much do you set aside today to cover these bills?
C. You have invested $60,476 at 8%. After paying the above school fees, how much would you remain at the end of six years?
Problem 2-12: "What is the PV of $100 received in:
A. Year 10 (at a discount rate of 1%)
B. Year 10 (at a discount rate of 13%)
C. Year 15 (at a discount rate of 25%)
D. Each of years 1 through 3 (at a discount rate of 12%)?"
Problem 3-3: In February 2009 Treasury 6s of 2026 offered a semiannually compounded yield of 3.5985%. Recognizing that coupons are paid semiannually, calculate the bond's price.
Problem 3-4: Here are the prices of three bonds with 10-year maturities:
Bond Coupon (%) Price (%)
If coupons are paid annually, which bond offered the highest yield to maturity?
Which had the lowest?
Which bonds had the longest and shortest durations?