Question

1(a). (TRUE or FALSE?) The indenture is the contract between the issuing corporation and the bond’s purchaser.

1(b). (TRUE or FALSE?) Common stock investors take more risk than a preferred stock and bond investors for a given company.

1(c). (TRUE or FALSE?) Common stocks are paid off, or retired, by a variety of means such as using staggered maturities, sinking funds, and call provisions.

Answer 1

1(a). (TRUE or FALSE?) The indenture is the contract between the issuing corporation and the bond’s purchaser.

The indenture refers to a legal and binding agreement, contract or document between two or more parties. And the documents featured indented sides as indicated by theirs name. The Bond indentures are indentures between bond issuers and bondholders, an indenture is a legal and binding contract specifying all the important features of a bond, such as its maturity date, timing of interest payments, method of interest calculation, and callable or convertible features, if applicable. The bond indenture also contains all the terms and conditions applicable to the bond issue. Other critical information included in the indenture are the financial covenants that govern the issuer and the formulas for calculating whether the issuer is within the covenants. Should a conflict arise between the issuer and bondholder, the indenture is the reference document utilized for conflict resolution. As a result, the indenture contains all the minutiae of the bond issue.

Therfore, its is false, The Bond indenture  is the contract between the issuing corporation and the bond’s purchaser.

1(b). (TRUE or FALSE?) Common stock investors take more risk than a preferred stock and bond investors for a given company.

True,

Common stock and preferred stock are the two main types of stocks that are sold by companies and traded among investors on the open market. Each type gives stockholders a partial ownership in the company represented by the stock. Despite some similarities, common stock and preferred stock have some significant differences, including the risk involved with ownership. Common stock is the most common type of stock that is issued by companies. And prices are fluctutes more often in short term.  Preferred stock is generally considered less volatile than common stock but typically has less potential for profit. On the flip side, investment in bonds is considered far much safer than stock because it gets priority in repayment and also safe on the side of price movement.

1(c). (TRUE or FALSE?) Common stocks are paid off, or retired, by a variety of means such as using staggered maturities, sinking funds, and call provisions.

False, Common stock is profitble and risky instrument while preferred stock and bonds are less profitable and less risky instrument. Bond and preferred stock is fixed income instrument and common stock is not. Therfore . common stocks are cannot be paid off, or retired, by a variety of means such as using taggered maturities, sinking funds, and call provisions.