The Weisu Corporation has A and B shares. The A shares have voting rights of 10 votes per share but will never pay a dividend. The B shares carry voting rights of one vote per share, and they pay dividends whenever declared by the board. Which shares would likely have a higher price? Why? (Hint: different investors might have different preference)

 

(2) When we compute the Equivalent Annual Cost (EAC), we end up with a number. What does this number represent? When would we use the EAC calculation? 

 

(3) Suppose Bond A carried a higher yield than comparable Bond B because of investors' uncertainty about the future of company B. If you were an investment manager who thought the market was overplaying these fears. In particular, if you thought that yields on Bond A would fall by 50 basis points. Which bonds would you buy or sell?

Answer rating: 100% (QA)

1 The A shares which have voting rights of 10 votes per share but will never pay a dividend would li... View the full answer