Question 1

Reasons for stock repurchases include all of the following except:

Accepted Answer

A)  to sell off shares used in management stock option incentive programs, in which managers can purchase shares of stock at pre-specified prices. 
B)  to use in stock-based acquisitions of other firms. 
C)  the firm has too little cash and sees its own stock as one of its most attractive sales alternatives. 
D)  The firm cannot issue bonds 
A)  to sell off shares used in management stock option incentive programs, in which managers can purchase shares of stock at pre-specified prices. 
B)  to use in stock-based acquisitions of other firms. 
C)  the firm has too little cash and sees its own stock as one of its most attractive sales alternatives. 
D)  The firm cannot issue bonds

Question 2

Mortgage bonds are secured by home mortgages.

Accepted Answer

A) True 
 B)False

Question 3

When the market interest rate falls below the coupon rate for a particular quality of bond, the "current yield":

Accepted Answer

A)  will be below the coupon rate 
B)  will be the same as the coupon rate 
C)  will be above the coupon rate 
D)  cannot be determined 
A)  will be below the coupon rate 
B)  will be the same as the coupon rate 
C)  will be above the coupon rate 
D)  cannot be determined

Question 4

Suppose a firm just issued a $1,000 par value convertible bond. Its conversion ratio is 30 and the stock currently sells for $25 per share. Would it make better financial sense to hold onto the bond or convert it?

Accepted Answer

A)  hold onto the bond 
B)  convert the bond 
C)  can't tell from this information 
D)  convert the bond after two more dividend payments 
A)  hold onto the bond 
B)  convert the bond 
C)  can't tell from this information 
D)  convert the bond after two more dividend payments

Question 5

The trust indenture is an extensive document that details the various provisions and covenants of the loan arrangement.

Accepted Answer

A) True 
 B)False

Question 6

A (n) ________________ is an extra dividend declared by the firm over and above its regular dividend payout.

Accepted Answer

A)  special dividend 
B)  supplemental dividend 
C)  extra-large dividend 
D)  treasury dividend 
A)  special dividend 
B)  supplemental dividend 
C)  extra-large dividend 
D)  treasury dividend

Question 7

The constant dividend growth model assumes:

Accepted Answer

A)  a constant annual dividend 
B)  a constant dividend growth rate for no more than the first 10 years 
C)  that the discount rate must be greater than the dividend growth rate 
D)  two of above are true assumptions 
A)  a constant annual dividend 
B)  a constant dividend growth rate for no more than the first 10 years 
C)  that the discount rate must be greater than the dividend growth rate 
D)  two of above are true assumptions

Question 8

Convertible preferred stock has a special provision that makes it convertible it to common stock if the corporation chooses to.

Accepted Answer

A) True 
 B)False

Question 9

Callable preferred stock gives the corporation the right to retire the preferred stock at its option.

Accepted Answer

A) True 
 B)False

Question 10

Intrinsic value is the best estimate of the true economic value of an asset based upon a forecast of future cash flows and an estimate of the appropriate discount rate.

Accepted Answer

A) True 
 B)False

Question 11

Putable bonds are the same as retractable bonds.

Accepted Answer

A) True 
 B)False

Question 12

Common stock can have which of the following characteristics? It can be:

Accepted Answer

A)  cumulative 
B)  non-cumulative 
C)  convertible 
D)  shareholder voting rights 
A)  cumulative 
B)  non-cumulative 
C)  convertible 
D)  shareholder voting rights

Question 13

A bond that is selling below par value.

Accepted Answer

A)  Overpriced bond 
B)  Underpriced bond 
C)  Premium bond 
D)  Discount bond 
A)  Overpriced bond 
B)  Underpriced bond 
C)  Premium bond 
D)  Discount bond

Question 14

For all bonds rated by both companies, both Standard & Poors and Fitch assign the same letters,
e.g. AAA or BBB+, to the same rankings.

Accepted Answer

A) True 
 B)False

Question 15

The effect of ______________ and _______________ on the value of a firm's stock and the wealth of shareholders is positive.

Accepted Answer

A)  share repurchases, stock splits 
B)  cash dividends, stock dividends 
C)  cash dividends, stock splits 
D)  none of the above 
A)  share repurchases, stock splits 
B)  cash dividends, stock dividends 
C)  cash dividends, stock splits 
D)  none of the above

Question 16

During periods of economic expansion, firms usually rely more on internal sources of funds.

Accepted Answer

A) True 
 B)False

Question 17

The bond issuer does not necessarily know who is receiving interest payments on bearer bonds.

Accepted Answer

A) True 
 B)False

Question 18

With a stock split, the investor's percentage ownership of the firm increases.

Accepted Answer

A) True 
 B)False

Question 19

Yankee bonds are U.S. dollar denominated bonds that are issued in the United States by a foreign issuer.

Accepted Answer

A) True 
 B)False

Question 20

The residual dividend policy states that dividends will stay the same regardless of the earnings of the firm.

Accepted Answer

A) True 
 B)False

Reasons for stock repurchases include all of the following except:

Mortgage bonds are secured by home mortgages.

When the market interest rate falls below the coupon rate for a particular quality of bond, the "current yield":

Suppose a firm just issued a $1,000 par value convertible bond. Its conversion ratio is 30 and the stock currently sells for $25 per share. Would it make better financial sense to hold onto the bond or convert it?

The trust indenture is an extensive document that details the various provisions and covenants of the loan arrangement.

A (n) ________________ is an extra dividend declared by the firm over and above its regular dividend payout.

The constant dividend growth model assumes:

Convertible preferred stock has a special provision that makes it convertible it to common stock if the corporation chooses to.

Callable preferred stock gives the corporation the right to retire the preferred stock at its option.

Intrinsic value is the best estimate of the true economic value of an asset based upon a forecast of future cash flows and an estimate of the appropriate discount rate.

Putable bonds are the same as retractable bonds.

Common stock can have which of the following characteristics? It can be:

A bond that is selling below par value.

For all bonds rated by both companies, both Standard & Poors and Fitch assign the same letters, e.g. AAA or BBB+, to the same rankings.

The effect of and _ on the value of a firm's stock and the wealth of shareholders is positive.

During periods of economic expansion, firms usually rely more on internal sources of funds.

The bond issuer does not necessarily know who is receiving interest payments on bearer bonds.

With a stock split, the investor's percentage ownership of the firm increases.

Yankee bonds are U.S. dollar denominated bonds that are issued in the United States by a foreign issuer.

The residual dividend policy states that dividends will stay the same regardless of the earnings of the firm.

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Securities and Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters

Exam 10: Bonds and Stocks: Characteristics and Valuations

Reasons for stock repurchases include all of the following except:

Mortgage bonds are secured by home mortgages.

When the market interest rate falls below the coupon rate for a particular quality of bond, the "current yield":

Suppose a firm just issued a $1,000 par value convertible bond. Its conversion ratio is 30 and the stock currently sells for $25 per share. Would it make better financial sense to hold onto the bond or convert it?

The trust indenture is an extensive document that details the various provisions and covenants of the loan arrangement.

A (n) ________________ is an extra dividend declared by the firm over and above its regular dividend payout.

The constant dividend growth model assumes:

Convertible preferred stock has a special provision that makes it convertible it to common stock if the corporation chooses to.

Callable preferred stock gives the corporation the right to retire the preferred stock at its option.

Intrinsic value is the best estimate of the true economic value of an asset based upon a forecast of future cash flows and an estimate of the appropriate discount rate.

Putable bonds are the same as retractable bonds.

Common stock can have which of the following characteristics? It can be:

A bond that is selling below par value.

For all bonds rated by both companies, both Standard & Poors and Fitch assign the same letters, e.g. AAA or BBB+, to the same rankings.

The effect of ______________ and _______________ on the value of a firm's stock and the wealth of shareholders is positive.

During periods of economic expansion, firms usually rely more on internal sources of funds.

The bond issuer does not necessarily know who is receiving interest payments on bearer bonds.

With a stock split, the investor's percentage ownership of the firm increases.

Yankee bonds are U.S. dollar denominated bonds that are issued in the United States by a foreign issuer.

The residual dividend policy states that dividends will stay the same regardless of the earnings of the firm.

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Securities and Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters

The effect of and _ on the value of a firm's stock and the wealth of shareholders is positive.