d. In many cases a firm is obliged to make regular contributions to a (n) sinking fund, which is then used to repurchase bonds.
e. Most bonds give the firm the right to repurchase or call the bonds at specified prices.
f. The benchmark interest rate that banks charge to their customers with good to excellent credit is generally termed the prime rate.
g. The interest rate on bank loans is often tied to short-term interest rates. These loans are usually called floating-rate loans.
h. Where there is a (n) private placement, securities are sold directly to a small group of institutional investors. These securities cannot be resold to individual investors. In the case of a (n) public issue, debt can be freely bought and sold by individual investors.
i. A long-term rental agreement is called a (n) lease.
j. A (n) convertible bond...
A (n) warrant gives its owner the right to buy shares in the issuing company at a predetermined price.
7. Preferred Stock. In what ways is preferred stock like long-term debt? In what ways is it like common stock?
Preferred stock is like long-term debt because it provides a specific dividend or a fixed claim, rather than a varying one. Preferred stock is also like long-term debt because it comes without any voting rights or control.
Preferred stock is like common stock because it represents a partial ownership claim in the company, with this claim being dependent on the number of shares owned. Preferred stock is also like common stock because it entitles the stockholder to dividends. A significant difference though, is that the dividend is fixed for preferred stock, but variable for common stock.
