FI 302 Test 2
Trials. Inc has issued a 30 year, $1000 face value, 10% annual coupon bonds, with a YTM of 9%. The annual interest payment for the bond is
$100
The _____ is the regular interest payment of the bond
Coupon
The terms ______ and _____ mean the same thing
Diversifiable risk and unsystematic risk
____ has to do with the speed and accuracy of processing a buy or sell order at the best available price
Operational efficiency
Junk bonds are street names for ___ grade bonds
Speculative
The ____ is the yield an individual would receive if the individual purchased the bond today and held the bond to the end of its life
Yield to maturity
_____ means that the percentage increase in the dividend is the same each year
constant growth
The practice of not putting all of your eggs in one basket is an illustration of
diversification
____ refers to how quickly information is reflected in the available prices for trading
informational efficiency
investors want to
minimize risk and maximize return
The holder of preferred stock is entitled to a constant dividend______
every period.
The type of risk that can be diversified away is called
unsystematic risk
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 mispriced stocks and routinely outperform the market
weak form efficient markets
Bonds are different from stocks because
bonds promise fixed payments for the life of their maturity
The ____ is the interest rate printed on the bond
coupon rate
When the ____ is less than the YTM, the bond sells at a/the ______ the par value
coupon rate; discount rate
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 and 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 the future cash flows that will be received
Zero coupon bonds are
price at a deep discount
The_____ is the market of first sale in which companies first sell their authorized shares to the public
primary market
The _____ is the intercept on the security market line
risk free rate
Beta is
the appropriate measure of risk for a well diversified portfolio a measure of systematic risk a measure of non-diversifiable risk
Which of the following investments is considered to be default risk free
treasury bills