Question 1

The par value of a common stock is an accounting and legal concept that bears no relationship to a firm's stock price or book value.

Accepted Answer

A) True 
 B)False

Question 2

The claims of collateralized bondholders are junior to the claims of debenture holders.

Accepted Answer

A) True 
 B)False

Question 3

Several factors will be considered by the board of directors and management as they consider the level of dividend payout.Some of these factors include:

Accepted Answer

A) the ability of the firm to generate cash to sustain the level of dividends. 
B) legal and contractual considerations 
C) growth opportunities 
D) all of the above 
E) none of the above 
A) the ability of the firm to generate cash to sustain the level of dividends. 
B) legal and contractual considerations 
C) growth opportunities 
D) all of the above 
E) none of the above

Question 4

An "r" bond rating means:

Accepted Answer

A) the firm is too new to be rated 
B) the bond issue is subordinate to other bond issues of the firm 
C) the price volatility of the issue is expected to be especially high 
D) none of the above 
A) the firm is too new to be rated 
B) the bond issue is subordinate to other bond issues of the firm 
C) the price volatility of the issue is expected to be especially high 
D) none of the above

Question 5

A convertible bond can be converted,at the issuing firm's option,into a specific number of shares of the issuer's common stock.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Bonds rated higher than BB+ by Standard & Poors and Fitch are considered to be investment grade issues.

Accepted Answer

A) True 
 B)False

Question 8

To accurately compare the rate of return on one investment with another,they should be:

Accepted Answer

A) equal in size or dollar amount 
B) measured over different time periods 
C) measured over equal time periods 
D) held for more than one year 
A) equal in size or dollar amount 
B) measured over different time periods 
C) measured over equal time periods 
D) held for more than one year

Question 9

A bond's value is the same as its principal amount when the coupon rate is:

Accepted Answer

A) the same as the required rate of return 
B) higher than the required rate of return 
C) lower than the required rate of return 
D) lower than the inflation rate 
A) the same as the required rate of return 
B) higher than the required rate of return 
C) lower than the required rate of return 
D) lower than the inflation rate

Question 10

Preferred stock is an equity security that has a senior claim to the firm's earnings and assets over bonds.

Accepted Answer

A) True 
 B)False

Question 11

Many putable bonds possess a call deferment period which is a specified period of time after the issue during which the bonds cannot be called.

Accepted Answer

A) True 
 B)False

Question 12

The following factors may affect a bond rating:

Accepted Answer

A) security provisions 
B) indenture provisions 
C) expected trends of industry operations 
D) all the above 
E) none of the above 
A) security provisions 
B) indenture provisions 
C) expected trends of industry operations 
D) all the above 
E) none of the above

Question 13

Several factors will be considered by the board of directors and management as they consider the level of dividend payout.Some of these factors include:

Accepted Answer

A) the ability of the firm to generate cash to sustain the level of dividends. 
B) legal and contractual considerations 
C) growth opportunities 
D) cost of other financing sources 
E) all of the above 
A) the ability of the firm to generate cash to sustain the level of dividends. 
B) legal and contractual considerations 
C) growth opportunities 
D) cost of other financing sources 
E) all of the above

Question 14

In general,research has shown that the performance of tracking stocks has exceeded that of parent company stocks.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

When the market interest rate is below the coupon rate for a particular quality of bond,the bond will be priced:

Accepted Answer

A) below its par value 
B) at its par value 
C) above its par value 
D) The bond price cannot be determined 
A) below its par value 
B) at its par value 
C) above its par value 
D) The bond price cannot be determined

Question 17

The last dividend on GTE stock was $4,and the expected growth rate is 10%.If you require a rate of return of 20%,what is the highest price you should be willing to pay for GTE stock?

Accepted Answer

A) $40 
B) $42.50 
C) $44 
D) none of the above 
A) $40 
B) $42.50 
C) $44 
D) none of the above

Question 18

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 19

The interest paid on bonds issued by corporations in the United States is tax deductible to the issuing corporation.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following bond types would describe unsecured obligations that depend on the general credit strength of the corporation?

Accepted Answer

A) collateralized bonds 
B) mortgage bonds 
C) equipment trust certificates 
D) debenture bonds 
A) collateralized bonds 
B) mortgage bonds 
C) equipment trust certificates 
D) debenture bonds

The par value of a common stock is an accounting and legal concept that bears no relationship to a firm's stock price or book value.

The claims of collateralized bondholders are junior to the claims of debenture holders.

Several factors will be considered by the board of directors and management as they consider the level of dividend payout.Some of these factors include:

An "r" bond rating means:

A convertible bond can be converted,at the issuing firm's option,into a specific number of shares of the issuer's common stock.

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

Bonds rated higher than BB+ by Standard & Poors and Fitch are considered to be investment grade issues.

To accurately compare the rate of return on one investment with another,they should be:

A bond's value is the same as its principal amount when the coupon rate is:

Preferred stock is an equity security that has a senior claim to the firm's earnings and assets over bonds.

Many putable bonds possess a call deferment period which is a specified period of time after the issue during which the bonds cannot be called.

The following factors may affect a bond rating:

Several factors will be considered by the board of directors and management as they consider the level of dividend payout.Some of these factors include:

In general,research has shown that the performance of tracking stocks has exceeded that of parent company stocks.

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

When the market interest rate is below the coupon rate for a particular quality of bond,the bond will be priced:

The last dividend on GTE stock was $4,and the expected growth rate is 10%.If you require a rate of return of 20%,what is the highest price you should be willing to pay for GTE stock?

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

The interest paid on bonds issued by corporations in the United States is tax deductible to the issuing corporation.

Which of the following bond types would describe unsecured obligations that depend on the general credit strength of the corporation?

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 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

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Exam 10: Bonds and Stocks: Characteristics and Valuation

The par value of a common stock is an accounting and legal concept that bears no relationship to a firm's stock price or book value.

The claims of collateralized bondholders are junior to the claims of debenture holders.

Several factors will be considered by the board of directors and management as they consider the level of dividend payout.Some of these factors include:

An "r" bond rating means:

A convertible bond can be converted,at the issuing firm's option,into a specific number of shares of the issuer's common stock.

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

Bonds rated higher than BB+ by Standard & Poors and Fitch are considered to be investment grade issues.

To accurately compare the rate of return on one investment with another,they should be:

A bond's value is the same as its principal amount when the coupon rate is:

Preferred stock is an equity security that has a senior claim to the firm's earnings and assets over bonds.

Many putable bonds possess a call deferment period which is a specified period of time after the issue during which the bonds cannot be called.

The following factors may affect a bond rating:

Several factors will be considered by the board of directors and management as they consider the level of dividend payout.Some of these factors include:

In general,research has shown that the performance of tracking stocks has exceeded that of parent company stocks.

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

When the market interest rate is below the coupon rate for a particular quality of bond,the bond will be priced:

The last dividend on GTE stock was $4,and the expected growth rate is 10%.If you require a rate of return of 20%,what is the highest price you should be willing to pay for GTE stock?

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

The interest paid on bonds issued by corporations in the United States is tax deductible to the issuing corporation.

Which of the following bond types would describe unsecured obligations that depend on the general credit strength of the corporation?

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 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