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