Question 1

According to the Gordon dividend model, which of the following variables would not affect a stock's price?

Accepted Answer

A) the firm's expected growth rate in dividends 
B) the number of shares outstanding 
C) the shareholder's required return 
D) all the above affect stock price 
A) the firm's expected growth rate in dividends 
B) the number of shares outstanding 
C) the shareholder's required return 
D) all the above affect stock price

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Preferred stock pays a dividend that is equal to its par value.

Accepted Answer

A) True 
 B)False

Question 4

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 5

Bond covenants are the best way for bondholders to protect themselves against dubious management actions.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is not an advantage of owning debt securities?

Accepted Answer

A) high claim on cash flows of a firm 
B) highest return of corporate securities 
C) high claim on assets of in liquidation 
D) none of the above 
A) high claim on cash flows of a firm 
B) highest return of corporate securities 
C) high claim on assets of in liquidation 
D) none of the above

Question 7

Two sources of risk that investors in nondomestic securities face beyond those of domestic securities include:

Accepted Answer

A) political risk 
B) exchange rate risk 
C) corruption risk 
D) two of the above 
E) all of the above 
A) political risk 
B) exchange rate risk 
C) corruption risk 
D) two of the above 
E) all of the above

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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 11

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%13.4% 
D) 13% 
A) 5% 
B) 8% 
C) 11%13.4% 
D) 13%

Question 12

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 13

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 14

To determine risks of nondomestic bonds, a multinational corporation must consider all but which one of the following risks?

Accepted Answer

A) political and economic risks 
B) seizure or expropriation of assets 
C) stabilized currencies 
D) foreign exchange controls and tax regulations 
A) political and economic risks 
B) seizure or expropriation of assets 
C) stabilized currencies 
D) foreign exchange controls and tax regulations

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

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 18

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 19

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 20

Firms issue more bonds than equities.

Accepted Answer

A) True 
 B)False

According to the Gordon dividend model, which of the following variables would not affect a stock's price?

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

Preferred stock pays a dividend that is equal to its par value.

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

Bond covenants are the best way for bondholders to protect themselves against dubious management actions.

Which of the following is not an advantage of owning debt securities?

Two sources of risk that investors in nondomestic securities face beyond those of domestic securities include:

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

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

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

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

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

To determine risks of nondomestic bonds, a multinational corporation must consider all but which one of the following risks?

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

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

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.

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

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

Firms issue more bonds than equities.

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

According to the Gordon dividend model, which of the following variables would not affect a stock's price?

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

Preferred stock pays a dividend that is equal to its par value.

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

Bond covenants are the best way for bondholders to protect themselves against dubious management actions.

Which of the following is not an advantage of owning debt securities?

Two sources of risk that investors in nondomestic securities face beyond those of domestic securities include:

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

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

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

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

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

To determine risks of nondomestic bonds, a multinational corporation must consider all but which one of the following risks?

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

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

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.

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

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

Firms issue more bonds than equities.

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