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Homework answers / question archive / All of the following factors may affect dividend policy except: A

All of the following factors may affect dividend policy except: A

Finance

All of the following factors may affect dividend policy except:

A. restrictions on dividend policy by bond indenture           B. the transfer agent who clears the stock trade

C. stockholders’ preference                                                   D. need for funds

The following would be the result of a company executing a stock split:

A. company raises new money                                 B. discourages stock trading activities                            C.  shareholders wealth increase immediately    D. the stock becomes more attractive

Which of the following bonds would pay the most interest?

A. subordinated debenture                            B. first mortgage                                                                           C.senior debenture                                              D. second mortgage

Which of the following bonds would pay the least interest?

A. subordinated debenture                            B. first mortgage                                                                           C.senior debenture                                              D. second mortgage

Which of the following has first claim on assets in case of bankruptcy?

A. sub-ordinated debenture   B. second-mortgage        C. senior debenture      D. first-mortgage

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1) B. the transfer agent who clears the stock.

All the other options affect dividend policies in some or other way except the stock transfer agent who does not have any role in what the dividends payout may be.

2) D. The stock becomes more attractive:

A stock split lowers the price of a single share which makes it attractive to a broad range of investors. Amazon's single stock is currently worth 3,145$ which is the monthly income of many people. If it does a 10:1 split, its single stock would be worth 314.5$ which would make it more affordable.

-------------------------explanation for the next three question---------------

In terms of risk, we can place the following bonds in the ascending order as follows.

1)First Mortage bonds
2) Second Mortgage Bonds
3) Senior Debenture
4) Subordinate debentures

Here, first mortgage which is backed by collateral has the lowest risk and first claim in case of bankruptcy, and Subordinate debentures, have the highest risk and last claim in case of bankruptcy.
To compensate for the high risk, bonds need to pay a higher interest rate.

3) A. subordinate debenture: they have the highest risk, so they will have to pay the highest interest rate to compensate for the extra risk.

4) B. First Mortgage: they have low risk, thus investors will demand less

5) D) First mortgage: these mortgage bonds are backed by collateral and are known as secured debt. They wil have first claim in the case of bankruptcy.