1. When would issuing bonds be a better option? When would issuing stocks be a better option?
2. An owner of 2,500 shares of Simmons Company common stock receives a stock dividend of 50 shares. How does the total equity of 2,550 shares compare with the total equity of 2,500 shares before the stock dividend?
3. If you asked your broker to buy you a 12% bond when the market interest rate for such bonds was 11%, would you expect to pay more or less than the face amount for the bond? Explain.