Question 1

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 2

If a bond with a par value of $500 and a call premium of 6% is called in before its maturity date,the firm would have to remit the following to the bondholders:

Accepted Answer

A) $500 
B) $530 
C) $0 
D) none of the above 
A) $500 
B) $530 
C) $0 
D) none of the above

Question 3

The call price of a callable bond is typically equal to par value plus two years interest.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is not a component of the Gordon (or constant dividend growth rate)model for valuing stocks?

Accepted Answer

A) next year's expected dividend 
B) a discount rate that reflects the riskiness of the stock 
C) a constant divided growth rate 
D) next year's expected earnings 
A) next year's expected dividend 
B) a discount rate that reflects the riskiness of the stock 
C) a constant divided growth rate 
D) next year's expected earnings

Question 5

Which of the following statements is most correct?

Accepted Answer

A) The par value of a common stock or preferred stock is not important. 
B) A convertible preferred stock gives the corporation the right to retire the preferred stock at its option. 
C) The U.S.security markets are the only public financial markets in which preferred stock can be sold. 
D) Similar to bonds,the fixed preferred stock dividend is a tax-deductible expense. 
A) The par value of a common stock or preferred stock is not important. 
B) A convertible preferred stock gives the corporation the right to retire the preferred stock at its option. 
C) The U.S.security markets are the only public financial markets in which preferred stock can be sold. 
D) Similar to bonds,the fixed preferred stock dividend is a tax-deductible expense.

Question 6

Dollar-denominated bonds that are issued in the United States by a foreign issuer are called:

Accepted Answer

A) Eurodollar bonds 
B) foreign bonds 
C) Yankee bonds 
D) global bonds 
A) Eurodollar bonds 
B) foreign bonds 
C) Yankee bonds 
D) global bonds

Question 7

Which of the following types of bonds have the lowest risk?

Accepted Answer

A) closed-end mortgage bond 
B) subordinated debenture 
C) open-end mortgage bond 
D) all the above would have the same risk 
A) closed-end mortgage bond 
B) subordinated debenture 
C) open-end mortgage bond 
D) all the above would have the same risk

Question 8

The terms or covenants of a bond contract are set out in which of the following documents?

Accepted Answer

A) debenture 
B) trust indenture 
C) mortgage 
D) negative pledge clause 
A) debenture 
B) trust indenture 
C) mortgage 
D) negative pledge clause

Question 9

A bond that can be changed into a specified number of shares of the issuer's common stock is called a:

Accepted Answer

A) retractable bond 
B) convertible bond 
C) callable bond 
D) collateralized bond 
A) retractable bond 
B) convertible bond 
C) callable bond 
D) collateralized bond

Question 10

A bond that does not permit future bond issues to be secured by any of the assets pledged as security to it is called a (n):

Accepted Answer

A) first mortgage bond 
B) equipment trust certificate 
C) closed-end mortgage bond 
D) open-end mortgage bond 
A) first mortgage bond 
B) equipment trust certificate 
C) closed-end mortgage bond 
D) open-end mortgage bond

Question 11

Reasons for stock repurchases include all of the following EXCEPT:

Accepted Answer

A) to acquire 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 the cash and sees its own stock as one of its most attractive investment alternatives. 
D) all of the above 
E) none of the above 
A) to acquire 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 the cash and sees its own stock as one of its most attractive investment alternatives. 
D) all of the above 
E) none of the above

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

If a bond with a par value of $500 and a call premium of 6% is called in before its maturity date,the firm would have to remit the following to the bondholders:

The call price of a callable bond is typically equal to par value plus two years interest.

Which of the following is not a component of the Gordon (or constant dividend growth rate)model for valuing stocks?

Which of the following statements is most correct?

Dollar-denominated bonds that are issued in the United States by a foreign issuer are called:

Which of the following types of bonds have the lowest risk?

The terms or covenants of a bond contract are set out in which of the following documents?

A bond that can be changed into a specified number of shares of the issuer's common stock is called a:

A bond that does not permit future bond issues to be secured by any of the assets pledged as security to it is called a (n):

Reasons for stock repurchases include all of the following EXCEPT:

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

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

If a bond with a par value of $500 and a call premium of 6% is called in before its maturity date,the firm would have to remit the following to the bondholders:

The call price of a callable bond is typically equal to par value plus two years interest.

Which of the following is not a component of the Gordon (or constant dividend growth rate)model for valuing stocks?

Which of the following statements is most correct?

Dollar-denominated bonds that are issued in the United States by a foreign issuer are called:

Which of the following types of bonds have the lowest risk?

The terms or covenants of a bond contract are set out in which of the following documents?

A bond that can be changed into a specified number of shares of the issuer's common stock is called a:

A bond that does not permit future bond issues to be secured by any of the assets pledged as security to it is called a (n):

Reasons for stock repurchases include all of the following EXCEPT:

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