Question 1

Corporate bonds are not as risky as common stocks;as a result,corporate bonds always lower returns to investors than do common stock.

Accepted Answer

A) True 
 B)False

Question 2

A bond's value will be below its maturity value of $1,000 if it pays interest of $100 per year and investors require a rate of return of,all other things being equal:

Accepted Answer

A) less than 10% 
B) exactly 10% 
C) higher than 10% 
D) either less than or greater than 10% 
A) less than 10% 
B) exactly 10% 
C) higher than 10% 
D) either less than or greater than 10%

Question 3

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

Accepted Answer

A) strong dividend 
B) supplemental dividend 
C) extra-large dividend 
D) treasury dividend 
E) none of the above 
A) strong dividend 
B) supplemental dividend 
C) extra-large dividend 
D) treasury dividend 
E) none of the above

Question 4

Most of the annual funds raised from security issues come from corporate bond sales.

Accepted Answer

A) True 
 B)False

Question 5

__________________ assess both the collateral and underlying bonds as well as the ability of the issuer to make timely interest and principal payments.

Accepted Answer

A) Bond covenants 
B) Bond indentures 
C) Bond ratings 
D) none of the above 
A) Bond covenants 
B) Bond indentures 
C) Bond ratings 
D) none of the above

Question 6

Which of the following statements is false?

Accepted Answer

A) Preferred stock that is both cumulative and convertible is a popular financing choice for investors purchasing shares of stock in small firms with high growth potential. 
B) Bond issues of a single firm can have different bond ratings if their security provisions differ. 
C) Yankee bonds are dollar-denominated bonds that are sold outside the United States. 
D) All of the above statements are correct. 
A) Preferred stock that is both cumulative and convertible is a popular financing choice for investors purchasing shares of stock in small firms with high growth potential. 
B) Bond issues of a single firm can have different bond ratings if their security provisions differ. 
C) Yankee bonds are dollar-denominated bonds that are sold outside the United States. 
D) All of the above statements are correct.

Question 7

A speculative (junk)bond issue as rated under Standard & Poor's would be rated ______ or below:

Accepted Answer

A) AA- 
B) BB+ 
C) CCC 
D) CC 
A) AA- 
B) BB+ 
C) CCC 
D) CC

Question 8

Most bonds currently issued in the United States today are bearer bonds.

Accepted Answer

A) True 
 B)False

Question 9

Preferred stock can have the following characteristic_______________?

Accepted Answer

A) cumulative 
B) non-cumulative 
C) convertible 
D) all of the above 
A) cumulative 
B) non-cumulative 
C) convertible 
D) all of the above

Question 10

Which of the following constitute default on a bond?

Accepted Answer

A) nonpayment of par value 
B) nonpayment of coupon 
C) violation of the indenture 
D) all the above 
E) none of the above 
A) nonpayment of par value 
B) nonpayment of coupon 
C) violation of the indenture 
D) all the above 
E) none of the above

Question 11

Eurodollar bonds are:

Accepted Answer

A) denominated in Eurodollars 
B) extremely long-term obligations 
C) scrutinized by the SEC 
D) none of the above 
A) denominated in Eurodollars 
B) extremely long-term obligations 
C) scrutinized by the SEC 
D) none of the above

Question 12

The value of a share of stock currently selling for $100 after a 5 for 1 split is:

Accepted Answer

A) $50 
B) $150 
C) $200 
D) $250 
E) none of the above 
A) $50 
B) $150 
C) $200 
D) $250 
E) none of the above

Question 13

Global bonds are generally denominated in euros and are marketed globally.

Accepted Answer

A) True 
 B)False

Question 14

Many convertible 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 15

Subordinate debentures are bonds whose claims are subordinate or junior to the claims of those holding debenture bonds.

Accepted Answer

A) True 
 B)False

Question 16

Many callable 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 17

U.S.firms are continuing to raise more funds overseas include all of the following EXCEPT:

Accepted Answer

A) it makes sense to raise funds in the county where a firm has a facility 
B) financing costs are sometimes lower overseas 
C) foreign underwriters often have more experience than U.S.underwriters 
D) issuers avoid the costly SEC approval process 
A) it makes sense to raise funds in the county where a firm has a facility 
B) financing costs are sometimes lower overseas 
C) foreign underwriters often have more experience than U.S.underwriters 
D) issuers avoid the costly SEC approval process

Question 18

A trustee represents the company to ensure that the covenants of the bond indenture are met.

Accepted Answer

A) True 
 B)False

Question 19

Most firms that issue dividends try to maintain a consistent _________________.

Accepted Answer

A) dividend per share 
B) dividend payout ratio 
C) both policies are frequently employed 
D) neither policy is frequently employed 
A) dividend per share 
B) dividend payout ratio 
C) both policies are frequently employed 
D) neither policy is frequently employed

Question 20

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

Accepted Answer

A) stock dividends,stock splits 
B) cash dividends,stock dividends 
C) cash dividends,stock splits 
D) all of the above 
E) none of the above 
A) stock dividends,stock splits 
B) cash dividends,stock dividends 
C) cash dividends,stock splits 
D) all of the above 
E) none of the above

Corporate bonds are not as risky as common stocks;as a result,corporate bonds always lower returns to investors than do common stock.

A bond's value will be below its maturity value of $1,000 if it pays interest of $100 per year and investors require a rate of return of,all other things being equal:

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

Most of the annual funds raised from security issues come from corporate bond sales.

__________________ assess both the collateral and underlying bonds as well as the ability of the issuer to make timely interest and principal payments.

Which of the following statements is false?

A speculative (junk)bond issue as rated under Standard & Poor's would be rated ______ or below:

Most bonds currently issued in the United States today are bearer bonds.

Preferred stock can have the following characteristic_______________?

Which of the following constitute default on a bond?

Eurodollar bonds are:

The value of a share of stock currently selling for $100 after a 5 for 1 split is:

Global bonds are generally denominated in euros and are marketed globally.

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

Subordinate debentures are bonds whose claims are subordinate or junior to the claims of those holding debenture bonds.

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

U.S.firms are continuing to raise more funds overseas include all of the following EXCEPT:

A trustee represents the company to ensure that the covenants of the bond indenture are met.

Most firms that issue dividends try to maintain a consistent _________________.

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

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

Exam 10: Bonds and Stocks: Characteristics and Valuation

Corporate bonds are not as risky as common stocks;as a result,corporate bonds always lower returns to investors than do common stock.

A bond's value will be below its maturity value of $1,000 if it pays interest of $100 per year and investors require a rate of return of,all other things being equal:

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

Most of the annual funds raised from security issues come from corporate bond sales.

__________________ assess both the collateral and underlying bonds as well as the ability of the issuer to make timely interest and principal payments.

Which of the following statements is false?

A speculative (junk)bond issue as rated under Standard & Poor's would be rated ______ or below:

Most bonds currently issued in the United States today are bearer bonds.

Preferred stock can have the following characteristic_______________?

Which of the following constitute default on a bond?

Eurodollar bonds are:

The value of a share of stock currently selling for $100 after a 5 for 1 split is:

Global bonds are generally denominated in euros and are marketed globally.

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

Subordinate debentures are bonds whose claims are subordinate or junior to the claims of those holding debenture bonds.

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

U.S.firms are continuing to raise more funds overseas include all of the following EXCEPT:

A trustee represents the company to ensure that the covenants of the bond indenture are met.

Most firms that issue dividends try to maintain a consistent _________________.

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

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

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