FI 302 Test 2 Review Terms
Which of the following types of bonds, as characterized by a feature, by definition has two coupon payments per year?
Semiannual
In the United States, there are three well known secondary stock markets. Which of the below is NOT one of these?
The Chicago Stock Exchange (CSE)
Which of the following is NOT a definition of beta?
A measure of risk that can be avoided
In regards to the fact that the pricing of stocks is more difficult than the pricing of bonds, which of the below statements is FALSE?
A stock's final sale is fixed in time on its maturity date
A bond may be issued by
All of these
Stocks differ from bonds because:
All of these
Which of the following types of bonds may the issuer buy back before maturity?
Callable bond
Which of the following investments is considered default risk free?
Common Stock
The _______ is the regular interest payment of the bond
Coupon
The _______ is the interest rate printed on the bond
Coupon Rate
________ refers to how quickly information is reflected in the available prices for trading.
Informational efficiency
Which of the statements below is TRUE?
Investors want to maximize return and minimize risk
A bond is a _______ instrument
Long-Term Debt
The _______ is the expiration date of the bond
Maturity date
Beta is
Measure of systematic risk
_______Means that the percentage increase in the dividend is the same each year
No growth
The holder of preferred stock is entitled to a constant dividend ____________
Only when earnings are positive
Has to do with the speed and accuracy of processing a buy or sell order
Operational efficiency
Type of risk can be diversified away
Systematic risk
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.
YTM
The Security Market Line has ________.
a positive slope
Unsystematic risk
also known as non diversified risk
When the ________ is less than the yield to maturity, the bond sells at a/the ________ the par value.
coupon rate; discount to
Strong-form efficient markets theory proclaims that ________.
current prices reflect the price and volume history of the stock, all publicly available information, and all private information
The Security Market Line ________.
is a straight line
Treasury ________ and ________ are semiannual bonds, while Treasury ________ are zero-coupon instruments.
notes; bonds; bills
The value of a financial asset is the ________.
present value of all of the future cash flows that will be received
The ________ is the market of first sale in which companies first sell their authorized shares to the public.
primary market
________ may be defined as a measure of uncertainty in a set of potential outcomes for an event in which there is a chance for some loss.
risk
"Junk" bonds are a street name for ________ grade bonds.
speculative
A more risky stock has a higher ________.
standard deviation and variance
The difference between the price and the par value of a zero-coupon bond represents ________.
the accumulated interest over the life of the bond
The constant growth dividend model requires that ________.
the return rate r is greater than the growth rate g of the dividend stream
Which of the following statements about probabilities is INCORRECT?
Probability is associated with an ex-post view.
Zero-Coupon bonds are
Tax exempt