For example, when I I stock prices increase, the value and dividends increase for common stock. However, the dividend does not increase for preferred stock cause with this type of stock, dividends are a fixed I percentage to par or face value. The payout of common stock dividends will change with increases and decreases in the stock market. If a company liquidates, common stock holders will likely I nothing because preferred stock holders and creditors will receivership share first. Common I I I stock holders will receive anything that is left to claim, which is usually nothing.
Question 4 If Airiest Best Parts, Inc. Announce that their dividends will increase at the end of the year, I the stock price computed above would increase. An increase in dividends generates a higher I I I stock price, which in turns spurs future production and investment in that company. Fifth I required rate of return increases the stock value will decrease because many people (investors) prefer I less risk. When the required rate of return increases, it is because of an increase in risk from the perspective Of the investor.
Investors would rather put their money into stocks that are less risky. I I I required rate of return increases the stock value will decrease because many people (investors) prefer I required rate of return is the rate of return that investors demand from a security (or investment) I s compensation for the amount of risk involved. When that rate increase, it means there is more risk involved. Changes in dividends will change stock price by either increasing it or decreasing it. We learned I I in class by using the Dividend Growth Model.
The price of stock and their dividends go in the same direction. When dividends are increased, the price of stock increase and when dividends decrease, I stock price will decrease, Course project – part I – Task 3: Bond Evaluation Question I: I The coupon rate for Airiest Best Parts, Inc. Would be 6. 9228%_ I Calculation was N = 40 (since it is 20 periods semi-annually) I 1,062 | MAT -37. 50 (multiplying 1,000 by 0375 | = 3. 4614% (this is the semi-annual coupon rate. The annual would be 3. 614 x 2 The difference between coupon rate and YET of bonds mathematically is 5772% I I definition, the Yield to Maturity (YET) is the market required rate of return for I I bonds of similar risk and maturity and is quoted asana PAR. The coupon rate is the stated interest rate, It is usually equal to the VT M at the time of issuance. Investors I may demand a higher coupon rate to reflect the risk of investing their money, I Factors contributing to the rockiness of bonds are price risk, reinvestment risk, I liquidity risk, default risk, and maturity risk.
A few examples: I A price risk involves the changes in price due to changes in interest rate. LET bonds are more risky than SST ones. Low coupon rate bonds are more risky than high coupon rate bonds. Coupon rate bonds. I Reinvestment rate risk involves the uncertainty concerning rates at which cash flows can be reinvested. SST bonds have more reinvesting rate risk than LET bonds and high I coupon rate bonds have more reinvestment rate risk than low coupon rate bonds. Question | Call provisions are positive covenants that Airiest states Parts, Inc. Could use in the true, Call provisions are deferred call and call premium.
Negative consonants are the same as restrictive covenants. They are promise from the company that they will not something. The must be included in the bond I indenture. For example, a negative covenant may restrict issuance of new debt or payment of dividends, I Positive covenants specie’ actions that the company must take. The call premium is what the investor I I will be payday the company for early redemption of the bond. Deferred call is a provision that I I prohibits the company from calling the bond before a certain date.
