Equal Shares of a fiRm's Profit Are Paid Out to Stockholders

question 66

Multiple Choice

Equal shares of a firm's profit are paid out to stockholders as

• A) interest.
• B) dividends.
• C) capital gains.
• D) net earnings.

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Definitions:

Annual Coupon

refers to the fixed interest payment that a bond issuer agrees to pay to the bondholder once every year until the bond's maturity date.

Zero-Coupon Bond

A bond that is issued at a discount to its face value but pays no interest; the investor's return is the difference between the purchase price and the face value at maturity.

Par Value

The face value of a bond or stock, representing the amount that the issuer agrees to pay at maturity or the nominal value assigned to a share of stock for accounting purposes.

Yield To Maturity

The total return anticipated on a bond if it is held until it matures, incorporating both interest payments and the increase or decrease in the bond's value to its face value at maturity.