fin300- exam 2

discount rate

A decrease in which of the following will increase the current value of a stock according to the dividend growth model?

face value

A discount bond's coupon rate is equal to the annual interest divided by the:

greater than 7 percent

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

where outstanding shares of stock are resold

The secondary market is best defined as the market:

broker

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

have a sinking fund provision

Callable bonds generally:

act as dealers

NYSE designated market makers:

inflation

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

have multiple rates of return

There are two distinct discount rates at which a particular project will have a zero net present value. In this situation, the project is said to:

asked price

Which one of the following is the price at which a dealer will sell a bond?

accepted b/c the profitability index is greater than 1

When the present value of the cash inflows exceeds the initial cost of a project, then the project should be:

PI greater than 1.0

Which one of the following indicates an accept decision for an independent project with conventional cash flows?

profitability index

Which one of the following methods of analysis provides the best information on the cost-benefit aspects of a project?

net present value

Which one of the following methods predicts the amount by which the value of a firm will change if a project is accepted?

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?

liquidity

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

IRR is equal to the required return when the net present value is equal to 0

Which one of the following statements related to the internal rate of return (IRR) is correct?

a purchase of newly issued stock from the issuer

Which one of the following transactions occurs in the primary market?

yield to maturity < coupon rate

Which one of these equations applies to a bond that currently has a market price that exceeds par value?

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?

time to maturity

A Treasury yield curve plots Treasury interest rates relative to:

dealer

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

dirty price

Rosita paid a total of $1,189, including accrued interest, to purchase a bond that has 7 of its initial 20 years left until maturity. This price is referred to as the:

real rates, inflation rates nominal rates

The Fisher effect is defined as the relationship between which of the following variables?

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:

spread

The difference between the price that a dealer is willing to pay and the price at which he or she will sell is called the:

net present value

The final decision on which one of two mutually exclusive projects to accept ultimately depends upon which one of the following?

payback period

The length of time a firm must wait to recoup the money it has invested in a project is called the:

discounted payback period

The length of time a firm must wait to recoup, in present value terms, the money it has invested in a project is referred to as the:

dividends

What are the distributions of either cash or stock to shareholders by a corporation called?