fin 300 exam 2

$38.53

A newly issued 10-year, $1,000, zero coupon bond just sold for $311.05. What is the implicit interest, in dollars, for the first year of the bond's life? Assume semiannual compounding.

greater than 7%

A newly issued bond has a coupon rate of 7 percent and semiannual interest payments. The bonds are currently priced at par. The effective annual rate provided by these bonds must be:

an unsecured bond with an initial maturity of 10 years or less.

A note is generally defined as:

floor broker

A person on the floor of the NYSE who executes buy and sell orders on behalf of customers is called a(n):

The yield to maturity is less than the coupon rate.

A premium bond that pays $60 in interest annually matures in seven years. The bond was originally issued three years ago at par. Which one of the following statements is accurate in respect to this bond today?

over-the-counter

A securities market primarily composed of dealers who buy and sell for their own inventories is referred to which type of market?

Early bond redemption

A sinking fund is managed by a trustee for which one of the following purposes?

protective covenant

The items included in an indenture that limit certain actions of the issuer in order to protect a bondholder's interests are referred to as the:

call premium

A $1,000 face value bond can be redeemed early at the issuer's discretion for $1,030, plus any accrued interest. The additional $30 is called the:

4.84%

A $1,000 face value bond has a coupon rate of 7 percent, a market price of $989.40, and 10 years left to maturity. Interest is paid semiannually. If the inflation rate is 2.2 percent, what is the yield to maturity when expressed in real terms?

$5,073.11

A Treasury bond is quoted at a price of 101.4621. What is the market price of this bond if the face value is $5,000?

time to maturity

A Treasury yield curve plots Treasury interest rates relative to:

clean price

A bond is quoted at a price of $1,011. This price is referred to as the:

bearer form

A bond that is payable to whomever has physical possession of the bond is said to be in

$19.57

A firm has a current EPS of $1.63 and a benchmark PE of 11.7. Earnings are expected to grow 2.6 percent annually. What is the target stock price in one year?

Executes orders on behalf of customers

A floor broker on the NYSE does which one of the following?

a discount;less than

All else constant, a bond will sell at _____ when the coupon rate is _____ the yield to maturity.

broker

An agent who arranges a transaction between a buyer and a seller of equity securities is called a:

dealer

An agent who maintains an inventory from which he or she buys and sells securities is called a:

are considered to be free of default risk.

Bonds issued by the U.S. government:

8.62%

Bonner Metals wants to issue new 20-year bonds. The company currently has 8.5 percent bonds on the market that sell for $994, make semiannual payments, and mature in 7 years. What should the coupon rate be on the new bonds if the firm wants to sell them at par?

Have a sinking fund provision

Callable bonds generally:

$26.42

Currently, a firm has an EPS of $2.08 and a benchmark PE of 12.7. Earnings are expected to grow by 3.8 percent annually. What is the estimated current stock price?

primary

Ernst & Frank stock is listed on NASDAQ. The firm is planning to issue some new equity shares for sale to the general public. This sale will definitely occur in which one of the following markets?

73225

Global Exporters wants to raise $31.3 million to expand its business. To accomplish this, it plans to sell 15-year, $1,000 face value, zero coupon bonds. The bonds will be priced to yield 5.75 percent. What is the minimum number of bonds it must sell to raise the money it needs? Assume semiannual compounding.

nominal rates

Interest rates that include an inflation premium are referred to as:

debenture

Jason's Paints just issued 20-year, 7.25 percent, unsecured bonds at par. These bonds fit the definition of which one of the following terms?

8.78%

Kaiser Industries has bonds on the market making annual payments, with 14 years to maturity, a par value of $1,000, and a current price of $1,108.60. At this price, the bonds yield 7.5 percent. What is the coupon rate?

5.18%

New Homes has a bond issue with a coupon rate of 5.5 percent that matures in 8.5 years. The bonds have a par value of $1,000 and a market price of $1,022. Interest is paid semiannually. What is the yield to maturity?

Are primarily designed to protect bondholders.

Protective covenants:

inflation

Real rates are defined as nominal rates that have been adjusted for which of the following?

$13.41

Sew 'N More just paid an annual dividend of $1.42 a share. The firm plans to pay annual dividends of $1.45, $1.50, and $1.53 over the next 3 years, respectively. After that time, the dividends will be held constant at $1.60 per share. What is this stock worth today at a discount rate of 11.7 percent?

7.22%

The 7 percent bonds issued by Modern Kitchens pay interest semiannually, mature in eight years, and have a $1,000 face value. Currently, the bonds sell for $987. What is the yield to maturity?

yield to maturity

The bond market requires a return of 9.8 percent on the 5-year bonds issued by JW Industries. The 9.8 percent is referred to as the:

.05/(1 − t*) = .07.

The break-even tax rate between a taxable corporate bond yielding 7 percent and a comparable nontaxable municipal bond yielding 5 percent can be expressed as:

10.86%

The current dividend yield on CJ's common stock is 1.89 percent. The company just paid an annual dividend of $1.56 and announced plans to pay $1.70 next year. The dividend growth rate is expected to remain constant at the current level. What is the required rate of return on this stock?

term structure of interest rates

The pure time value of money is known as the:

where outstanding shares of stock are resold

The secondary market is best defined as the market:

A bond's unfavorable tax status

The taxability risk premium compensates bondholders for which one of the following?

are quoted as a percentage of par.

U. S. Treasury bonds:

Long-term, taxable junk bond

Which bond would you generally expect to have the highest yield?

Pillar System

Which one of the following is an electronic system used by the NYSE for directly transmitting orders to designated market makers?

default risk

Which one of the following premiums is compensation for the possibility that a bond issuer may not pay a bond's interest or principal payments as expected?

g

Which one of the following represents the capital gains yield as used in the dividend growth model?

Determining the amount of the dividend to be paid per share

Which one of the following rights is never directly granted to all shareholders of a publicly held corporation?

Liquidity

Which one of the following risk premiums compensates for the inability to easily resell a bond prior to maturity?

The term structure of interest rates and the time to maturity are always directly related.

Which one of the following statements is false concerning the term structure of interest rates?

12.53 years

World Travel has 7 percent, semiannual, coupon bonds outstanding with a current market price of $1,023.46, a par value of $1,000, and a yield to maturity of 6.72 percent. How many years is it until these bonds mature?

voting by proxy

You cannot attend the shareholder's meeting for Alpha United so you authorize another shareholder to vote on your behalf. What is the granting of this authority called?

$1,108.58

You purchase a bond with an invoice price of $1,119. The bond has a coupon rate of 6.25 percent, a face value of $1,000, and there are four months to the next semiannual coupon date. What is the clean price of this bond?

callable

bond that can be paid off early at the issuer's discretion is referred to as being which type of bond?