The Par Value of Common Stock of a Firm Is

question 12

Multiple Choice

The par value of common stock of a firm is $15 per share. Based on this information, determine the true statement.

• A) If the share is purchased for $8, then the firm has to pay $7 per share to the stockholder, at the time of liquidation.
• B) If the share is purchased for $20, then the firm has to pay an interest of $5 per share.
• C) The stockholder has to pay $15 per share to the firm every year.
• D) The firm pays a fixed dividend of $15 every year.
• E) If the share is purchased for $10, then the stockholder has to pay $5, in case of bankruptcy.

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Definitions:

Standard Error

A statistical measure that represents the accuracy with which a sample distribution represents a population using the standard deviation.

P-value

The odds of getting results from a test that are as extreme as or exceed the extremity of the observed results, on the assumption that the null hypothesis is in effect.

Population Correlation

A measure of the strength and direction of association that exists between two variables measured across an entire population.

Alternative

In hypothesis testing, this refers to the hypothesis that contradicts the null hypothesis, suggesting some effect or difference exists.