Question 1

Most bonds pay coupon interest

Accepted Answer

A) monthly 
B) quarterly 
C) semi-annually 
D) annually 
E) none of the above 
A) monthly 
B) quarterly 
C) semi-annually 
D) annually 
E) none of the above

Question 2

The par value of a preferred stock is meaningful in that it is often used to determine the fixed annual dividend.

Accepted Answer

A) True 
 B)False

Question 3

Governmental agencies may not issue debenture bonds.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

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

Question 5

The value of a share of stock currently selling for $100 after a 2 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 6

When the market interest rate rises above 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 7

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

Accepted Answer

A) $20 
B) $40 
C) $500 
D) $1000 
E) none of the above 
A) $20 
B) $40 
C) $500 
D) $1000 
E) none of the above

Question 8

The _____________ policy states that dividends will vary based upon how much excess funds the firm has from year-to-year,whereas under a ________________ policy the firm pays a constant percentage of earnings as dividends,so as earnings rise and fall so does the dollar amount of dividends.

Accepted Answer

A) constant payout ratio,residual dividend 
B) residual dividend,constant payout ratio 
C) constant dividend,variable payout ratio 
D) variable payout ratio,constant dividend 
E) none of the above 
A) constant payout ratio,residual dividend 
B) residual dividend,constant payout ratio 
C) constant dividend,variable payout ratio 
D) variable payout ratio,constant dividend 
E) none of the above

Question 9

A debt holder may force the firm to abide by the terms of the debt contract even if the result is reorganization or dissolution of the firm.

Accepted Answer

A) True 
 B)False

Question 10

The dividends paid on stock issued by corporations in the United States are tax deductible to the issuing corporation.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Inflation-protected Treasury notes have a principal value that changes in accordance with the consumer price index (CPI).

Accepted Answer

A) True 
 B)False

Question 14

An individual or organization that represents the bondholders to ensure the indenture's provisions are respected by the bond issuer is called a (n):

Accepted Answer

A) trust indenture 
B) trustee 
C) investment banker 
D) trust organization 
A) trust indenture 
B) trustee 
C) investment banker 
D) trust organization

Question 15

Which of the following bonds can be redeemed prior to maturity by the firm?

Accepted Answer

A) callable bonds 
B) convertible bonds 
C) putable bonds 
D) retractable bonds 
A) callable bonds 
B) convertible bonds 
C) putable bonds 
D) retractable bonds

Question 16

ADRs,or American Depository Receipts,which are traded on U.S.exchanges,represent shares of common stock that trade on foreign exchanges.

Accepted Answer

A) True 
 B)False

Question 17

A firm's stock is expected to pay a $3 annual dividend next year,the current stock price is $60,and the expected growth rate in dividends is 8%.Using the Gordon approach,what is the expected return?

Accepted Answer

A) 5% 
B) 8% 
C) 11% 
D) 13% 
A) 5% 
B) 8% 
C) 11% 
D) 13%

Question 18

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

Question 19

You are considering buying a 10-year,$1,000 par value bond issued by IBM.The coupon rate is 8% annually,with interest being paid semiannually.If you expect to earn a 10% rate of return on this bond,what is the maximum price you should be willing to pay for this IBM bond?

Accepted Answer

A) $189.93 
B) $875.39 
C) $898.54 
D) $911.46 
A) $189.93 
B) $875.39 
C) $898.54 
D) $911.46

Question 20

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) none of the above 
A) hold onto the bond 
B) convert the bond 
C) can't tell from this information 
D) none of the above

Most bonds pay coupon interest

The par value of a preferred stock is meaningful in that it is often used to determine the fixed annual dividend.

Governmental agencies may not issue debenture bonds.

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

The value of a share of stock currently selling for $100 after a 2 for 1 split is:

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

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

The _ policy states that dividends will vary based upon how much excess funds the firm has from year-to-year,whereas under a ____ policy the firm pays a constant percentage of earnings as dividends,so as earnings rise and fall so does the dollar amount of dividends.

A debt holder may force the firm to abide by the terms of the debt contract even if the result is reorganization or dissolution of the firm.

The dividends paid on stock issued by corporations in the United States are tax deductible to the issuing corporation.

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

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

Inflation-protected Treasury notes have a principal value that changes in accordance with the consumer price index (CPI).

An individual or organization that represents the bondholders to ensure the indenture's provisions are respected by the bond issuer is called a (n):

Which of the following bonds can be redeemed prior to maturity by the firm?

ADRs,or American Depository Receipts,which are traded on U.S.exchanges,represent shares of common stock that trade on foreign exchanges.

A firm's stock is expected to pay a $3 annual dividend next year,the current stock price is $60,and the expected growth rate in dividends is 8%.Using the Gordon approach,what is the expected return?

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

You are considering buying a 10-year,$1,000 par value bond issued by IBM.The coupon rate is 8% annually,with interest being paid semiannually.If you expect to earn a 10% rate of return on this bond,what is the maximum price you should be willing to pay for this IBM bond?

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 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

Most bonds pay coupon interest

The par value of a preferred stock is meaningful in that it is often used to determine the fixed annual dividend.

Governmental agencies may not issue debenture bonds.

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

The value of a share of stock currently selling for $100 after a 2 for 1 split is:

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

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

The _____________ policy states that dividends will vary based upon how much excess funds the firm has from year-to-year,whereas under a ________________ policy the firm pays a constant percentage of earnings as dividends,so as earnings rise and fall so does the dollar amount of dividends.

A debt holder may force the firm to abide by the terms of the debt contract even if the result is reorganization or dissolution of the firm.

The dividends paid on stock issued by corporations in the United States are tax deductible to the issuing corporation.

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

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

Inflation-protected Treasury notes have a principal value that changes in accordance with the consumer price index (CPI).

An individual or organization that represents the bondholders to ensure the indenture's provisions are respected by the bond issuer is called a (n):

Which of the following bonds can be redeemed prior to maturity by the firm?

ADRs,or American Depository Receipts,which are traded on U.S.exchanges,represent shares of common stock that trade on foreign exchanges.

A firm's stock is expected to pay a $3 annual dividend next year,the current stock price is $60,and the expected growth rate in dividends is 8%.Using the Gordon approach,what is the expected return?

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

You are considering buying a 10-year,$1,000 par value bond issued by IBM.The coupon rate is 8% annually,with interest being paid semiannually.If you expect to earn a 10% rate of return on this bond,what is the maximum price you should be willing to pay for this IBM bond?

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 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.

The _ policy states that dividends will vary based upon how much excess funds the firm has from year-to-year,whereas under a ____ policy the firm pays a constant percentage of earnings as dividends,so as earnings rise and fall so does the dollar amount of dividends.