Problem 1: Take the following list of securities and arrange them in order of their priority of claims:
- Preferred stock Senior debenture
- Subordinated debenture Senior secured debt
- Common stock Junior secured debt
Problem 2: What is the difference between the following yields: coupon rate, current yield, yield to maturity?
Problem 3: How does the preemptive right protect stockholders from dilution?
Problem 4: If common stockholders are the owners of the company, why do they have the last claim on assets and a residual claim on income?
Problem 5: Preferred stock is often referred to as a hybrid security. What is meant by this term as applied to preferred stock?
Problem 6: Why is the cumulative feature of preferred stock particularly important to preferred stockholders?