Question 1

Bond issues of a single firm can have different bond ratings if their security provisions differ.

Accepted Answer

A) True 
 B)False

Question 2

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 3

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 4

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 5

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 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

A sinking fund:

Accepted Answer

A) is a special fund set up to pay of the creditors of bankrupt firms 
B) requires specific approval by the firm's the board of directors 
C) requires the issuer to retire a bond issue incrementally over time 
D) none of the above 
A) is a special fund set up to pay of the creditors of bankrupt firms 
B) requires specific approval by the firm's the board of directors 
C) requires the issuer to retire a bond issue incrementally over time 
D) none of the above

Question 8

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

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 9

The interest received by individuals on bonds issued by corporations in the United States is not tax deductible to the investor.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

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 12

RJR Nabisco recently experienced a market reevaluation due to a number of tobacco lawsuits.The firm has a bond outstanding with 15 years to maturity, and a coupon rate of 8%, with interest being paid semiannually.The required yield to maturity has risen to 16%.What is the price of the RJR Nabisco bond?

Accepted Answer

A) $1,000 
B) $804 
C) $767 
D) $550 
A) $1,000 
B) $804 
C) $767 
D) $550

Question 13

A bond will sell at a premium if its required return or discount rate is greater than its coupon rate.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

A (n) _____________ gives the bondholder a claim to specific assets (identified through serial numbers) such as railroad cars or airplanes.

Accepted Answer

A) first mortgage bond 
B) equipment trust certificate 
C) inventory bond 
D) collateralized bond 
A) first mortgage bond 
B) equipment trust certificate 
C) inventory bond 
D) collateralized bond

Question 16

The value of a share of stock currently selling for $100 after it has a 5 for 1 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 17

Putable bonds are sometimes referred to as:

Accepted Answer

A) retractable bonds 
B) callable bonds 
C) convertible bonds 
D) none of the above 
A) retractable bonds 
B) callable bonds 
C) convertible bonds 
D) none of the above

Question 18

Common stock possesses the highest claim on the assets and cash flow of the firm.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following types of stocks have the lowest risk to shareholders?

Accepted Answer

A) common stock 
B) cumulative preferred stock 
C) non-cumulative preferred stock 
D) callable preferred stock 
A) common stock 
B) cumulative preferred stock 
C) non-cumulative preferred stock 
D) callable preferred stock

Question 20

All of the following represent bonds secured by real assets except a (n):

Accepted Answer

A) closed-end mortgage bond 
B) equipment trust certificate 
C) debenture 
D) more than one of the aboveopen-end mortgage bond 
A) closed-end mortgage bond 
B) equipment trust certificate 
C) debenture 
D) more than one of the aboveopen-end mortgage bond

Bond issues of a single firm can have different bond ratings if their security provisions differ.

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.

Most bonds pay coupon interest

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

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

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

A sinking fund:

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

The interest received by individuals on bonds issued by corporations in the United States is not tax deductible to the investor.

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

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

A bond will sell at a premium if its required return or discount rate is greater than its coupon rate.

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

A (n) _____________ gives the bondholder a claim to specific assets (identified through serial numbers) such as railroad cars or airplanes.

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

Putable bonds are sometimes referred to as:

Common stock possesses the highest claim on the assets and cash flow of the firm.

Which of the following types of stocks have the lowest risk to shareholders?

All of the following represent bonds secured by real assets except a (n):

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

Bond issues of a single firm can have different bond ratings if their security provisions differ.

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.

Most bonds pay coupon interest

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

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

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

A sinking fund:

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

The interest received by individuals on bonds issued by corporations in the United States is not tax deductible to the investor.

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

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

A bond will sell at a premium if its required return or discount rate is greater than its coupon rate.

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

A (n) _____________ gives the bondholder a claim to specific assets (identified through serial numbers) such as railroad cars or airplanes.

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

Putable bonds are sometimes referred to as:

Common stock possesses the highest claim on the assets and cash flow of the firm.

Which of the following types of stocks have the lowest risk to shareholders?

All of the following represent bonds secured by real assets except a (n):

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 _ 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.

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