Fi-302 Multiple choice

A bond __________ instrument by which a borrower of funds agrees to pay back the funds with interest on specific dates in the future a. Long-term debt b. Derivative c. Short-term equity d. Long-term equity

A

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 mis-priced stocks and routinely outperform the market a. Weak-form efficient markets b. Operational efficient markets c. Semi-strong-form efficient markets d. Strong -form efficient markets

A

The ________ is the expiration date of the bond a. Maturity date b. Future value c. Coupon d. Yield to maturity

A

The terms ________ and ________ mean the same thing a. Diversifiable risk; unsystematic risk b. Diversifiable risk; systematic risk c. Nondiversifiable risk; unsystematic risk d. Total risk, unique risk

A

Which of the following investments is considered to be default risk-free? a. Treasury bills b. Currency options c. AAA rated corporate bonds d. Common stock

A

_______ refers to how quickly information is reflected in the available prices for trading a. Informational efficiency b. Market efficiency c. Operational efficiency d. Mechanical efficiency

A

The _____ is the interest rate printed on the bond a. Yield to maturity b. Coupon rate c. Semiannual coupon rate d. Compound rate

B

The holder of preferred stock is entitled to a constant dividend a. Only when earnings are positive and only when the stock price increases b. Every period c. Only when earnings are positive d. Only when the stock price increases

B

The practice of not putting all of your eggs in one basket is an illustration of______ a. Portion control b. Diversification c. Variance d. Expected return

B

The value of a financial asset is the ______ a. Present value of just the capital gains but not the dividends b. Present value of all of the future cash flows that will be received c. Future value of just the capital gains but not the dividends d. Sum of all previous cash flows received

B

Trials Inc.has issued 30-year $1000 face value, 10% annual coupon bonds, with yield to maturity of 9%. The annual interest payment for the bond is... a. $50 b. $100 c. $45 d. $90

B

When the _______ is less than the yield to maturity, the bond sells at a /the _______ the par value a. Time to maturity, discount to b. Coupon rate; discount to c. Time to maturity; same price as d. Coupon rate; premium over

B

Which of the statements below is TRUE? a. Investors want to maximize return and maximize risk b. Investors want to maximize return and minimize risk c. Investors want to minimize return and minimize risk d. Investors want to minimize return and maximize risk

B

______ has to do with the speed and accuracy of processing a buy or sell order at the best available price a. mechanical efficiency b. Operational efficiency d. Informational efficiency d. Market efficiency

B

_______ means that the percentage increase in the dividend is the same each year a. A constant cash flow b. Constant growth c. No growth d Inconsistent growth

B

TheThe ______ is the yield an individual would receive if the individual purchased the bond today and held the bond to the end of its life a. Coupon rate b. Current yield c. Yield to maturity d. Prime rate

C

Which of the following is NOT a definition of beta? a. A measure of nondiversifiable risk b. A statistical measure of an individual asset's or portfolio's co-movement with the returns of the market c. A measure of risk that can be avoided d. A measure of systematic risk

C

You can think of the _______ as the "used stock" market because these shares have been owned or "used" previously a. Primary market b. Initial public offering market c. Secondary market d. NYSE market

C

Zero-coupon bonds are a. Sold at a premium b. Tax exempt c. Priced at a deep discount d. Priced using semiannual instead of annual pricing formula

C

Stocks differ from bonds because a. Firms pay bond cash flows prior to paying taxes while stock cash flows are after tax b. The ending par value of a bond is known at purchase while the ending value of a share of stock is unknown at purchase c. Bond cash flows are known while stock cash flows are uncertain d. All of the above

D

Unsystematic risk a. Is also known as nondiversifiable risk b. Is equal to 2 times the systematic risk c. Is system wide risk d. Can be diversified away

D

The ________ is the regular interest payment of the bond a. Coupon rate b. Dividend c. Coupon d. Par

C

"Junk" bonds are a street name for ________ grade bonds a. Speculative and investment b. Investment c. Speculative d. Extremely speculative

C

A beta of 1.0 is the beta of the _____, while a beta of 0.0 is the measure for a _____ a. Risk free security; single security held on its own b. Risk free security; market c. Market; risk-free security d. Market; single security held on its own

C