Question

1.

An investment strategy offered by some public corporations that allows you to purchase shares of stock from the dividends received from the corporation is called:

		A divident purchase strategy (DPS)
		Employee Stock purchase plan (ESP)
		Share purchase plans (SPP)
		Dividend Reinvestment Program (DRIP)

2.

1. Why are bonds risky?

   		Because the bond issuer can cut their dividend.
   		Because the bond could default and stop paying interest.
   		Because the time value of money makes the coupon payments worthless over time.
   		Bonds don't increase interest payments like stocks.

Answer 1

Q 01:

An investment strategy offered by some public corporations that allow you to purchase shares of stock from the dividends received from the corporation is called: Dividend Reinvestment Program. When a corporation distributes dividends one can purchase shares of the corporate on the prevailing market price which eventually reinvested in corporate.  

A dividend purchase strategy (DPS): A dividend purchase strategy an Invalid term. False

Employee Stock purchase plan (ESP): Employee Stock Purchase Plan is when corporate purchases back distributed stock to employees in terms of bonus/ benefits. False

Share purchase plans (SPP): Share Purchase Plan may indicate Share buyback plans of corporate. When corporates go for capital restructuring proposals work on these plans. False

Dividend Reinvestment Program (DRIP): Right Option: When public corporations that allow purchasing shares of stock from the dividends received from the corporation.

Q 02:

bonds are risky because :

Because the bond issuer can cut their dividend: Bond issuer if reducing/cut dividends it does not affect coupon payment of Bond. The coupon payment is a fixed obligation bond issuer needs to pay regularly.False

The bond could default and stop paying interest. : Bond issuer can default and payment may stopped. This is the major risk factor of a bond. True

The time value of money makes the coupon payments worthless over time: Time Value of Money of coupon payments of Bonds associated with Bond Yield to maturity. And YTM is higher / lower it does not associate with risk. False

Bonds don't increase interest payments like stocks: But it also does not decrease Coupon payment. Future cash flows are fixed and already communicated over the bond's life. So it does not affect the risk factor of a bond. False