FI 302 Test 2 study guide

Trials inc. has issued a 30 year $1,000 face value, 10% annual coupon bonds, with a yield to maturity of 9.0%. The annual interest payment for the bond is____

$100

Beta is

All of the above

The ____ is the regular interest payments of the bond.

Coupon

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

Coupon rate; discount to

The terms ____ and ____ mean the same thing.

Diversifiable risk; unsystematic risk

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

Informational efficiency

Which is true

Investors want to maximize return and minimize risk.

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

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

Operational efficiency

Zero-Coupon Bonds are____

Priced at a deep discount

"Junk" bonds are a street name for ____ grade bonds

Speculative

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

Treasury bills

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

if the equation E(ri)=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]

Stocks differ from bonds because:

all of the above

Unsystematic risk

can be diversified away

_____ means that the percentage increase in the dividend is the same each year

constant growth

The ____ is the interest rate printed on the bond

coupon rate

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

diversification

The holder of preferred stock is entitled to a constant dividend ____

every period

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

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

secondary market

The ___ is the return the bondholder receives on the bond if held to maturity.

yield to maturity