FI 302 T 2

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Trials Inc. has issued 30 year $1,000 face value, 10% annual compounds, with a yield to maturity of 9%. The annual interest payment for the bond is _______.

$100

______ means that the percentage increase in the dividend is the same each year.

Constant growth

When the ______ is less than the yield to maturity, the bond sells at a/the ______ the par value.

Coupon Rate; discount to

______ refers to how quickly information is reflected in the available prices for trading.

Informational efficiency

______ has to do with he speed and accuracy of processing a buy or sell order at the best available price.

Operational Efficiency

Junk bonds are a street name for _____ grade bonds.

Speculative

Which of the following investments is considered to be default risk free?

Treasury Bills

Investors want to maximize return and minimize risk. (T/F)

True

In ______, current prices reflect the price history and trading volume of the stock. It is of no use to chart historical stock prices to predict future stock prices such that you can identify misplaced stocks and routinely outperform the market.

Weak form efficient markets

The appropriate rate to use to discount the cash flows of a bond in order to determine the current price is the _____.

Yield to maturity

If the equation E(r1)=rf+[E(rm)-rf]xi is the linear equation for the Security Market Line, what portion represents the market risk premium for a stock that does not have a beta of 1.0?

[E(rm)-rf]

Beta is _______.

a measure of non diversifiable risk a measure of systematic risk the appropriate measure of risk for a well-diversified portfolio

Bonds are different from stocks because ______.

bonds promise fixed payments for the length of their maturity

unsystematic risk

can be diversified away

The ______ is the regular interest payment of the bond.

coupon

The ______ is the interest rate printed on the bond.

coupon rate

The terms _____ and _______ mean the same thing.

diversifiable risk; unsystematic risk

The practice of not. putting all of your eggs in one basket is an illustration of ______.

diversification

The holder of preferred stock is entitled to a constant dividend ______.

every period

A bond is a ______ instrument by which a borrower of funds agrees to pay back the funds with interest on specific dates in the future>

long term debt

A beta of 1.0 is the beta of the ______, while a beta of 0.0 is the measure for a _______.

market; risk free security

The ______ is the expiration date of the bond.

maturity date

The value of a financial asset is the ______.

present value of all of the future cash flows that will be received

Zero-Coupon bonds are ______.

priced at a deep discount

You can think of the ______ as the "used stock" market because these shares have been owned or "used" previously.

secondary market

In _______, current prices already reflect the price history and volume of the stock as well as all available public information.

semi strong form efficient markets

The type of risk that can be diversified away is called ______.

unsystematic risk

The ______ is a market derived interest rate used to discount the future cash flows of the bond.

yield to maturity


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