A bond is a fixed interest (fixed income) security that:

1. ranks below any preferred (or preference) shares and ordinary shares in the priority of payment.

2. typically pays interest semi-annually.

3. sells at a premium when its coupon rate is above the corresponding market rate.

Select one:

a. 2 and 3

b. 1 and 3

c. only 2

d. 1 and 2

e. only 3

An risk-taking investor with funds to invest in a long-term company security with high volatility, would buy:

Select one:

a. Commercial paper

b. Warrant

c. Certificate of deposit

d. Corporate bond

e. A debenture

Which of the following statements regarding common shares is true?

Select one:

a. The par value of a common share is usually $100.

b. A partly paid share means bond-holders can partly claim for funds in case of default.

c. Dividends paid on common stock are at the discretion of the company.

d. In the event of financial difficulties, creditors of a company have limited recourse on the share holders.

e. The market value of common share is equal to its book value.