Question 1

Which of the following bonds may be secured by home mortgages?

Accepted Answer

A) mortgage bonds 
B) collateralized mortgage obligations 
C) closed-end mortgage bonds 
D) open-end mortgage bonds 
A) mortgage bonds 
B) collateralized mortgage obligations 
C) closed-end mortgage bonds 
D) open-end mortgage bonds

Question 2

An "r" bond rating means:

Accepted Answer

A) the firm is too new to be rated 
B) the bond issue is subordinate to other bond issues of the firm 
C) the price volatility of the issue is expected to be especially high 
D) none of the above 
A) the firm is too new to be rated 
B) the bond issue is subordinate to other bond issues of the firm 
C) the price volatility of the issue is expected to be especially high 
D) none of the above

Question 3

When the market interest rate is the same as the coupon rate for a particular quality of bond, the bond will be priced:

Accepted Answer

A) below its par value 
B) at its par value 
C) above its par value 
D) The bond price cannot be determined 
A) below its par value 
B) at its par value 
C) above its par value 
D) The bond price cannot be determined

Question 4

__________________ assess both the collateral and underlying bonds as well asand 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 5

The interest paid on bonds issued by corporations in the United States is tax deductible to the issuing corporation.

Accepted Answer

A) True 
 B)False

Question 6

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 7

Reasons for stock repurchases include all of the following EXCEPT:

Accepted Answer

A) to sell off 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 too little cash and sees its own stock as one of its most attractive sales alternatives. 
D) all of the above 
E) none of the above 
A) to sell off 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 too little cash and sees its own stock as one of its most attractive sales alternatives. 
D) all of the above 
E) none of the above

Question 8

A firm's stock is expected to pay a $2 annual dividend next year, and the current $50 stock price is expected to rise to $53 over the next year.What is the expected return?

Accepted Answer

A) 8% 
B) 10% 
C) 12% 
D) 15% 
A) 8% 
B) 10% 
C) 12% 
D) 15%

Question 9

When the market interest rate rises for a particular quality of bond, the price of the bond falls, which gives investors a new:

Accepted Answer

A) coupon rate 
B) interest payment amount 
C) yield to maturity 
D) maturity 
A) coupon rate 
B) interest payment amount 
C) yield to maturity 
D) maturity

Question 10

Callable bonds can be redeemed prior to maturity by the firm.

Accepted Answer

A) True 
 B)False

Question 11

Long term business funds are obtained by issuing commercial paper and corporate bonds.

Accepted Answer

A) True 
 B)False

Question 12

The three types of risk faced by investors in domestic bonds include all of the following EXCEPT:

Accepted Answer

A) political risk 
B) credit risk 
C) interest rate risk 
D) reinvestment rate risk 
A) political risk 
B) credit risk 
C) interest rate risk 
D) reinvestment rate risk

Question 13

A convertible bond can be converted, at the issuing firm's option, into a specific number of shares of the issuer's common stock.

Accepted Answer

A) True 
 B)False

Question 14

What is the value of GM HM stock which currently has a dividend of $2 and is growing at 7%? The investor's required rate of return is 11%.

Accepted Answer

A) $46 
B) $50 
C) $52 
D) none of the above53.50 
A) $46 
B) $50 
C) $52 
D) none of the above53.50

Question 15

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

Accepted Answer

A) $5020 
B) $150 
C) $200 
D) $250500 
E) none of the above 
A) $5020 
B) $150 
C) $200 
D) $250500 
E) none of the above

Question 16

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 17

The par value of a common stock is an accounting and legal concept that bears no relationship to a firm's stock price or book value.

Accepted Answer

A) True 
 B)False

Question 18

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 19

An unrated bond:

Accepted Answer

A) is perceived as having lower than average risk 
B) are termed as "debentures" 
C) generally has a lower yield than rated bonds 
D) none of the above 
A) is perceived as having lower than average risk 
B) are termed as "debentures" 
C) generally has a lower yield than rated bonds 
D) none of the above

Question 20

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

Accepted Answer

A) True 
 B)False

Which of the following bonds may be secured by home mortgages?

An "r" bond rating means:

When the market interest rate is the same as the coupon rate for a particular quality of bond, the bond will be priced:

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

The interest paid on bonds issued by corporations in the United States is tax deductible to the issuing corporation.

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

Reasons for stock repurchases include all of the following EXCEPT:

A firm's stock is expected to pay a $2 annual dividend next year, and the current $50 stock price is expected to rise to $53 over the next year.What is the expected return?

When the market interest rate rises for a particular quality of bond, the price of the bond falls, which gives investors a new:

Callable bonds can be redeemed prior to maturity by the firm.

Long term business funds are obtained by issuing commercial paper and corporate bonds.

The three types of risk faced by investors in domestic bonds include all of the following EXCEPT:

A convertible bond can be converted, at the issuing firm's option, into a specific number of shares of the issuer's common stock.

What is the value of GM HM stock which currently has a dividend of $2 and is growing at 7%? The investor's required rate of return is 11%.

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

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.

The par value of a common stock is an accounting and legal concept that bears no relationship to a firm's stock price or book value.

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

An unrated bond:

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

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

Which of the following bonds may be secured by home mortgages?

An "r" bond rating means:

When the market interest rate is the same as the coupon rate for a particular quality of bond, the bond will be priced:

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

The interest paid on bonds issued by corporations in the United States is tax deductible to the issuing corporation.

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

Reasons for stock repurchases include all of the following EXCEPT:

A firm's stock is expected to pay a $2 annual dividend next year, and the current $50 stock price is expected to rise to $53 over the next year.What is the expected return?

When the market interest rate rises for a particular quality of bond, the price of the bond falls, which gives investors a new:

Callable bonds can be redeemed prior to maturity by the firm.

Long term business funds are obtained by issuing commercial paper and corporate bonds.

The three types of risk faced by investors in domestic bonds include all of the following EXCEPT:

A convertible bond can be converted, at the issuing firm's option, into a specific number of shares of the issuer's common stock.

What is the value of GM HM stock which currently has a dividend of $2 and is growing at 7%? The investor's required rate of return is 11%.

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

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.

The par value of a common stock is an accounting and legal concept that bears no relationship to a firm's stock price or book value.

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

An unrated bond:

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

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