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Preferred stock is often seen as a hybrid security as it has characteristics of both debt and equity. The Wall Street Journal once reported two new securities used by companies going public: income deposit securities and enhanced income securities, both of which carry characteristics of both debt and equity. The securities are sold to investors, who will receive two payments from the company-one based on the company's equity shares and one based on the company's outstanding debt. The securities are being underwritten and marketed by such investment banking firms as Canadian Imperial Bank of Commerce, Goldman Sachs, and Lehman Brothers.
REQUIRED:
a. What is a hybrid security, and how should it be reflected on the balance sheet, income statement, statement of cash flows, and statement of shareholders' equity?
b. Describe some reasons why an investor might want to purchase a hybrid security and some reasons why a company might want to issue a hybrid security.
c. What are some characteristics that would make these securities look more like debt? More like equity?
explain why it is or is not an example of the experimental research strategy.
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You just won the grand prize in a national writing contest! As your prize, you will receive $2,000 a month for ten years. If you can earn 7 percent on your money, what is this prize worth to you today?
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jafee corp. common stock is priced at 36.50 per share. the company just paid its 0.50 quarterly dividend. interest
What factors constitute a "Safety Net" offered by a central bank to its commercial bank? What is the role of each factor?
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