Please write down your choice in the blank before the question. Two points each and 10 points in total.

A. _____ Which of the followings statements regarding preferred stock is CORRECT?

a. Preferred stock has a par value and its dividend is often stated as a percentage of par.

b. Preferred stocks are all perpetual.

c. Preferred stockholders should not care about omitted preferred dividends at all because they will be put into arrears and paid eventually.

d. Preferred stock is like equity in that it gives stockholders the voting right, and it is like debt in that it makes pre-specified payments.

B. _____ Which of the following statements regarding preferred stock is CORRECT?

a. For investors, preferred stock is more risky than equity but less risky than debt.

b. Investors view preferred stock as more risky than debt and hence the preferred dividend yield of a firm is higher than the yield to maturity of the same issuers debt.

c. For issuers, preferred stock is less risky than debt because the omission of preferred dividends wont put the firm into default.

d. Preferred stock is a good investment instrument not only for corporate investors but also for individual investors.

C. _____ Which of the following statements regarding warrants is NOT CORRECT?

a. The issuer firm can increase dividends or strike price to induceexercising of warrants.

b. Firm As warrants have a strike price of $50, are selling for $8 when the market price of its stock is $55. The firm announces a dividend payment of $2, this would cause warrant holders to exercise their warrants.

c. When warrants are exercised, the issuer firm receives additional equity capital.

d. When warrants are exercised, the issuer firms shares outstanding increase.

D. _____ Which of the following statements regarding convertibles is NOT CORRECT?

a. A convertible bond can be converted into certain number of common shares given certain conditions are met.

b. Convertibles have lower coupon rate than otherwise identical straight bonds.

c. A convertible bond can be viewed as a straight bond bundled with a detachable conversion option.

d. Convertible bonds are typically issued with a call provision that will enable the firm to induce conversion.

E. _____ Which of the following statements is CORRECT?

a. Warrants and the convertibility feature of a convertible bond are both call options and exercising them would bring in new capital for the issuer.

b. Warrants are called when the bonds they are issued with are called for redemption.

c. Warrants issuers are more interested in selling debt while convertibles issuers are more interested in selling equity.

d. Warrants are often used as a sweetener for bonds by large, mature firms.