Fin Final MFL

If the total asset turnover​ decreases, then the return on equity will A. not change. B. decrease. C. increase. D. ​change, but in an indeterminate way.

B. decrease

The capital asset pricing model A. provides a risk−return trade−off in which risk is measured in terms of the market returns. B. provides a risk−return trade−off in which risk is measured in terms of beta. C. measures risk as the correlation coefficient between a security and market rates of return. D. depicts the total risk of a security.

B. provides a risk-return trade-off in which risk is measured in terms of beta.

True or False: If an investor earns​ 10% on her investment in the first year and loses​ 10% the next​ year, she will have neither a gain nor a loss.

False

True or False: If investors became more risk averse The SML would shift downward and the slope of the SML would fall.

False

True or False: Miller Motorworks has a​ $1,000 par​ value, 8% annual coupon bond with interest payable semiannually with a remaining term of 15 years. The annual market yield on similar bonds is​ 6%. This bond will at a discount from par.

False

True or False: Portfolio returns can be calculated as the geometric mean of the returns on the individual assets in the portfolio.

False

True or False: Shorter−term bonds have greater interest rate risk than do longer−term bonds.

False

True or False: The arithmetic average rate of return takes compounding into effect.

False

True or False: The goal of profit maximization is equivalent to the goal of maximization of share value.

False

True or False: The par value of a corporate bond indicates the level of interest payments that will be paid to investors.

False

What is the value of​ $750 invested at​ 7.5% compounded quarterly for 4.5 years​ (round to the nearest​ $1)? A. $1,048 B. $1,038 C. $1,010 D. ​$808

A. $1,048

What is the expected dollar return on a portfolio which consists of​ $9,000 invested in an​ S&P 500 Index​ fund, $32,500 in a technology​ fund, and​ $8,500 in Treasury Bills. The expected rate of return is​ 11% on the​ S&P Index​ fund, 14% on the technology fund and​ 2% on the Treasury Bills. A. $5,710 B. $13,640 C. $4,500

A. $5,710

If you put​ $6,000 in a savings account that yields an​ 1% rate of interest compounded​ daily, what will the investment be worth at the end of one​ year? A. $6,060.30 B. $6,006.03 C. ​$6060.00 D. $6,760.95

A. $6,060.30

ABC Service can purchase a new assembler for​ $15,052 that will provide an annual net cash flow of​ $6,000 per year for five years. Calculate the NPV of the assembler if the required rate of return is​ 12%. (Round your answer to the nearest​ $1.) A. $6,577 B. $4,568 C. $1,056 D. $7,621

A. $6,577

You bought a painting 10 years ago as an investment. You originally paid​ $85,000 for it. If you sold it for​ $484,050, what was your annual return on​ investment? A. 19% B. 12.8% C. 4.7% D. 47%

A. 19%

The inventory turnover ratio is: A.2.35 times. B.0.29 times. C.3.7 times D. 0.43 times there is a whole ass table for #13 so I'm sorry

A. 2.35 times.

Interest rates have increased by 50 basis points​ (0.5%). Which of the following bonds will decline most in​ price? All of the bonds have AA ratings. A. A bond that matures in 10 years. B. A bond that matures in 10 days C. A bond that matures in 5 years D. All of the bonds will decline in price by approximately the same amount.

A. A bond that matures in 10 years.

Which of the following statements is​ true? A. A stock with a beta less than 1.0 has lower nondiversifiable risk than a stock with a beta of 1.0. B. A stock with a beta less than 1.0 has higher nondiversifiable risk than a stock with a beta of 1.0. C. A stock with a beta greater than 1.0 has lower nondiversifiable risk than a stock with a beta of 1.0. D. A stock with a beta less than zero has no exposure to systematic risk.

A. A stock with a beta less than 1.0 has lower nondiversifiable risk than a stock with a beta of 1.0.

Over the period 1995−​2015, which pair of investments does not perfectly fit the​ "higher risk, higher​ return" pattern? (See chart) A. Government​ bonds, treasury bills B. Corporate​ bonds, international equities C. U.S.​ equities, corporate bonds D. U.S.​ Equities, international equities

A. Government bonds, treasury bills

You are considering investing in Ford Motor Company. Which of the following is an example of diversifiable​ risk? A. Risk resulting from uncertainty regarding a possible strike against Ford B. Risk resulting from the possibility of a stock market crash C. Risk resulting from an expected recession D. Risk resulting from interest rates decreasing

A. Risk resulting from uncertainty regarding a possible strike against Ford

The security market line​ (SML) relates risk to​ return, for a given set of market conditions. If expected inflation​ increases, which of the following would most likely​ occur? A. The SML line would shift up. B. The market risk premium would increase. C. The slope of the SML would increase. D. Beta would increase.

A. The SML line would shift up

A decrease in​ ________ will increase gross profit margin. A. cost of goods sold B. depreciation expense C. interest expense D. both A and B

A. cost of goods sold

Which of the following is NOT included in computing EBT​ (earnings before​ taxes)? A. Dividends B. Cost of goods sold C. Marketing expenses D. Depreciation expense

A. dividends

​Currently, the expected return on the market is​ 12.5% and the required rate of return for​ Alpha, Inc. is​ 12.5%. Therefore,​ Alpha's beta must be A. equal to 1.0. B. greater than 1.0. C. less than 1.0. D. unknown based on the information provided.

A. equal to 1.0

The expected yield of a bond will be less than its yield to maturity when A. market interest rates are expected to fall. B. market interest rates are expected to rise. C. when the bond is purchased at a discount. D. the expected yield of a bond cannot be lower than its yield to maturity.

A. market interest rates are expected to fall

On the income statement, sales revenue, minus cost of goods sold and operating expenses, equals: A. Net operating income (EBIT) B. Retained earnings C. Net income available to preferred shareholders D. Net profit

A. net operating income (EBIT)

Bond ratings directly affect a​ bond's A. spread over the Treasury yield. B. call provisions. C. coupon rate. D. maturity date.

A. spread over the Treasury yield.

The beta of ABC Co. stock is the slope of A. the line of best fit for a plot of ABC Co. returns against the returns of the market portfolio for the same period. B. the arbitrage pricing line. C. the security market line. D. the characteristic line for a plot of returns on the​ S&P 500 versus returns on short−term Treasury bills.

A. the line of best fit for a plot of ABC Co. returns against the returns of the market portfolio for the same period

If the market price of a bond​ increases, then A. the yield to maturity decreases. B. the coupon rate increases. C. the yield to maturity increases. D. none of the above.

A. the yield to maturity decreases.

When a​ bond's coupon rate is lower than the required rate of​ return, the bond A. will sell at a discount from par. B. may sell at either a discount or a premium. C. will sell at a premium over par D. will sell at par value.

A. will sett at a discount from par

MI has a​ $1,000 par​ value, 30minus−year bond outstanding that was issued 20 years ago at an annual coupon rate of​ 10%, paid semiannually. Market interest rates on similar bonds are​ 7%. Calculate the​ bond's price. A. $1,168.31 B. $1,213.19 C. $1,000.00 D. $956.42

B. $1,213.19

​Caldwell, Inc. sold an issue of 30minus−​year, ​$1,000 par value bonds to the public. The bonds carry a​ 10.85% coupon rate and pay interest semiannually. It is now 12 years later. The current market rate of interest on the Caldwell bonds is​ 8.45%. What is the current market price​ (intrinsic value) of the​ bonds? Round off to the nearest​ $1. A. $976 B. $1,220 C. $751 D. $1,177

B. $1,220

A retirement plan guarantees to pay you or your estate a fixed amount for 20 years. At the time of​ retirement, you will have​ $31,360 to your credit in the plan. The plan anticipates earning​ 8% interest annually over the period you receive benefits. How much will your annual benefits​ be, assuming the first payment occurs one year from your retirement​ date? A. $2,000 B. $3,194 C. $6,272 D. $682

B. $3,194

What is the present value of​ $1,000 to be received 10 years from​ today? Assume that the investment pays​ 8.5% and it is compounded monthly​ (round to the nearest​ $1). A. ​$3,106 B. $429 C. $833 D. $893

B. $429

A commercial bank will loan you​ $17,500 for two years to buy a car. The loan must be repaid in 24 equal monthly payments. The annual interest rate on the loan is​ 6% of the unpaid balance. What is the amount of the monthly​ payments? A. $688.11 B. $775.61 C. $1,394.98 D. $3779.39

B. $775.61

Smith Corporation has current assets of​ $11,400, inventories of​ $4,000, and a current ratio of 2.6. What is​ Smith's quick or acid test​ ratio? A. 0.74 B. 1.69 C. 1.35 D. 0.54

B. 1.69 Current ratio= current assets/ current liabilities 2.6= 11400/ x x= 4384 Quick ratio= (current assets-inventories)/current liabilities = (11400-4000)/4384

Storm King Associates has a total asset turnover ratio of 1.90 and a return on total assets of​ 7.20%. What is Storm​ King's net profit​ margin? A. 13.68 B. 3.79 C. 9.10 D. None of the above

B. 3.79 =7.2/1.9

Your firm has the following income statement​ items: sales of​ $52,000,000; income tax of​ $1,880,000; operating expenses of​ $9,000,000; cost of goods sold of​ $36,000,000; and interest expense of​ $800,000. Compute the​ firm's gross profit margin. A. 69.2% B. 30.8% C. 13.5% D. 8.3%

B. 30.8% (sales-COGS)/sales (52,000,000-36,000,000)/52,000,000

You paid​ $865.50 for a corporate bond that has a​ 6.75% coupon rate. What is the​ bond's current​ yield? A. 15.001% B. 7.800% C. 6.667% D. 8.375%

B. 7.800%

At​ 8% compounded​ annually, how long will it take​ $750 to​ double? A. 6.5 years B. 9 years C. 12 years D. 48 months

B. 9 years

Which of the following has a beta of​ zero? A. The market B. A risk−free asset C. A high−risk asset D. Both A and B

B. A Risk-free asset

Which of the following statements about bonds is​ true? A. Long−term bonds have less interest rate risk than do short−term bonds. B. If market interest rates are below a​ bond's coupon interest​ rate, then the bond will sell above its par value. C. As the maturity date of a bond​ approaches, the market value of a bond will become more volatile. D. Bond prices move in the same direction as market interest rates.

B. If market interest rates are below a​ bond's coupon interest​ rate, then the bond will sell above its par value.

Why is the quick ratio a more refined measure of liquidity than the current​ ratio? A. It is a quicker calculation to make. B. Inventories are omitted from the numerator of the ratio because they are generally the least liquid of the​ firm's current assets. C. Cash is the most liquid current asset. D. It measures how quickly cash and other liquid assets flow through the company.

B. Inventories are omitted from the numerator of the ratio because they are generally the least liquid of the​ firm's current assets.

All of the following operate as financial intermediaries EXCEPT: A. insurance companies B. The U.S. Treasury C. commercial banks D. mutual funds

B. The U.S. Treasury

Quirk Drugs sold an issue of 30minus−​year, ​$1,000 par value bonds to the public that carry a​ 10.85% coupon​ rate, payable semiannually. It is now 10 years​ later, and the current market rate of interest is​ 9.00%. If interest rates remain at​ 9.00% until​ Quirk's bonds​ mature, what will happen to the value of the bonds over​ time? A. The bonds will sell at a discount and fall in value until maturity. B. The bonds will sell at a premium and decline in value until maturity. C. The bonds will sell at a premium and rise in value until maturity. D. The bonds will sell at a discount and rise in value until maturity.

B. The bonds will sell at a premium and decline

Which of the following statements about bonds is​ true? A. As the maturity date of a bond​ approaches, the market value of a bond will become more volatile. B. The market value of a bond moves in the opposite direction of market interest rates. C. Long−term bonds are less risky than short−term bonds. D. If market interest rates are higher than a​ bond's coupon interest​ rate, then the bond will sell above its par value. E. None of the above.

B. The market value of a bond moves in the opposite direction of market interest rates.

Businesses that wish to issue public debt will usually seek help from A. the Federal Reserve bank. B. an investment banking firm. C. a large life insurance company. D. a state or union pension fund.

B. an investment banking firm

Managers of corporations need to act in an ethical manner: A. because ethics violations will be punished by the law B. because a business must be trusted by investors, customers, and the public if it is to succeed C. because business managers must answer to a higher authority D. because ethical behavior is its own justification

B. because a business must be trusted by investors, customers, and the public if it is to succeed

A bond investor seeking capital gains should purchase A. bonds with short maturity dates when interest rates are expected to rise. B. bonds with distant maturity dates when interest rates are expected to decline. C. bonds with short maturity dates when interest rates are expected to decline. D. bonds with distant maturity dates when interest rates are expected to rise.

B. bonds with distant maturity dates when interest rates are expected to decline.

Terminator Bug Company bonds have a​ 14% coupon rate. Interest is paid semiannually. The bonds have a par value of​ $1,000 and will mature 10 years from now. Compute the value of Terminator bonds if​ investors' required rate of return is​ 12%. A. $1,149.39 B. $1,000.00 C. $1,114.70 D. $894.06

C. $1,114.70

What is the present value of​ $250 received at the beginning of each year for 21​ years? Assume that the first payment is received today. Use a discount rate of​ 12%, and round your answer to the nearest​ $10. A. $1,870 B. $3,243 C. $2,117 D. $2,090

C. $2,117

Your firm has the following income statement​ items: sales of​ $50,250,000; income tax of​ $1,744,000; operating expenses of​ $10,115,000; cost of goods sold of​ $35,025,000; and interest expense of​ $750,000. What is the amount of the​ firm's EBIT? A. $15,552,000 B. $58,000,000 C. $5,110,000 D. $4,630,000

C. $5,110,000 sales-operating expenses-COGS 50,250,000-10,115,000-35,025,000

You are considering investing in a portfolio consisting of​ 40% Electric General and​ 60% Buckstar. If the expected rate of return on Electric General is​ 16% and the expected return on Buckstar is​ 9%, what is the expected return on the​ portfolio? A. 12.50% B. 10.00% C. 11.80% D. 13.20%

C. 11.80%

True or False: If a market is weak form​ efficient, an investor can make higher than expected profits by studying the past price patterns of a stock.

False

You have been offered a credit card with an interest rate of​ 1.5% per month. This is equivalent to and effective annual rate​ (EAR) of A. 18.00%. B. 12.17%. C. ​19.56%. D.​ 24.00%.

C. 19.56 (help)

Skrit Corporation has a net profit margin of​ 15% and a total asset turnover of 1.7. What is​ Skrit's return on total​ assets? A. 8.8% B. 12.3% C. 25.5% D. 11.1%

C. 25.5

The Blackburn Group has recently issued 20−​year, unsecured bonds rated BB by​ Moody's. These bonds yield 443 basis points above the U.S. Treasury yield of​ 2.76%. The yield to maturity on these bonds is A. mortgage bonds. B. 12.23% C. 7.19% D. 4.43%.

C. 7.19%

What is the expected rate of return on a bond that pays a coupon rate of​ 9% paid semi−​annually, has a par value of​ $1,000, matures in five​ years, and is currently selling for​ $1071? A. 8.40% B. 4.21% C. 7.28% D. 3.64%

C. 7.28%

​Stephen's grandmother deposited​ $100 in an investment account for him when he was​ born, 25 years ago. The account is now worth​ $1,500. What was the average rate of return on the​ account? Which of the following is a correct way to solve this problem using​ EXCEL? A. =rate(0,−​100,1500,25) B. =PV(25,i,−​100,1500) C. =rate(25,0,−​100,1500) D. =rate(25,0,100,1500)

C. =rate(25,0,-100,1500)

Which of the following statements is​ true? A. The legal document that describes all of the terms and conditions of a bond issue is called a debenture agreement. B. A bond that has a rating of AA is considered to be a junk bond. C. A bond will sell at a premium if the prevailing required rate of return is less than the​ bond's coupon rate. D. A zero coupon is a bond that is secured by a lien on real property.

C. A bond will sell at a premium if the prevailing required rate of return is less than the​ bond's coupon rate.

Which of the following best represents operating​ income? A. Income after financing activities B. Income from discontinued operations C. Earnings before interest and taxes D. Income from capital gains

C. Earnings before interest and taxes

Which of the following statements about bonds is​ true? A. As the maturity date of a bond​ approaches, the market value of a bond will become more volatile. B. Long−term bonds have less interest rate risk than do short−term bonds. C. If market interest rates are above a​ bond's coupon interest​ rate, then the bond will sell below its par value. D. Bond prices move in the same direction as market interest rates.

C. If market interest rates are above a​ bond's coupon interest​ rate, then the bond will sell below its par value.

Which of the following statements about bonds is​ true? A. Bond prices move in the same direction as market interest rates. B. If market interest rates are higher than a​ bond's coupon interest​ rate, then the bond will sell above its par value. C. If market interest rates​ change, long−term bonds will fluctuate more in value than short−term bonds. D. Long−term bonds are less risky than short−term bonds. E. None of the above.

C. If market interest rates​ change, long−term bonds will fluctuate more in value than short−term bonds.

If current market interest rates​ rise, what will happen to the value of outstanding​ bonds? A. It will remain unchanged. B. It will rise. C. It will fall. D. There is no connection between current market interest rates and the value of outstanding bonds.

C. It will fall

You are considering buying some stock in Continental Grain. Which of the following is an example of nondiversifiable​ risk? A. Risk resulting from a news release that several of​ Continental's grain silos were tainted B. Risk resulting from an explosion in a grain elevator owned by Continental C. Risk resulting from a general decline in the stock market D. Risk resulting from an impending lawsuit against Continental

C. Risk resulting from a general decline in the stock market

The security market line​ (SML) relates risk to​ return, for a given set of market conditions. If risk aversion​ increases, which of the following would most likely​ occur? A. Beta would increase. B. The slope of the SML would increase. C. The market risk premium would increase. D. The SML line would shift up.

C. The market risk premium would increase.

CEOs naming friends to the board of directors and paying them more than the norm is an example of the A. proxy fights. B. majority voting feature. C. agency problem. D. preemptive right.

C. agency problem

A negative coefficient of correlation implies that A. asset return tend to move in opposite directions. B. on​ average, returns to such assets are negative. C. asset returns tend to move in opposite directions. D. None of the above because the coefficient of correlation cannot be negative.

C. asset returns tend to move in opposite directions

Evidence that agency costs exists A. because underperforming​ CEO's are frequently voted out by shareholders. B. because management often pursues risky but profitable opportunities rather than​ safer, less profitable opportunities. C. because stock prices increase when an underperforming CEO is unexpectedly replaced. D. because they are shown in footnotes to the financial statements.

C. because stock prices increase when an underperforming CEO is unexpectedly replaced.

If current market interest rates​ fall, what will happen to the value of outstanding​ bonds? A. It will remain unchanged. B. It will fall. C. It will rise. D. There is no connection between current market interest rates and the value of outstanding bonds.

C. it will rise.

Evidence exists that directors A. are vigilant in requiring that the​ firm's assets be used efficiently. B. are quick to replace or reduce the compensation of underperforming CEOs. C. often represent the interests of the managers who nominated them for directorships. D. aggressively represent the interests of shareholders.

C. often represent the interests of the managers who nominated them for directorships.

All of the following are true about insurance companies EXCEPT: A. they participate in equipment leasing B. they invest their reserves C. they may only invest their reserves in interest paying bank accounts under Federal Law D. they may guarantee to reimburse lenders should lenders' loan go into default

C. they may only invest their reserves in interest paying bank accounts under Federal Law

​ABC, Inc. just paid a dividend of​ $2. ABC expects dividends to grow at​ 10%. The return on stocks like​ ABC, Inc. is typically around​ 12%. What is the most you would pay for a share of ABC​ stock? A. $100 B. $120 C. $130 D. $110

D. $110

Michael Masury has an opportunity to buy a commercial property. Rents from the property will be​ $24,000 and he expects them to increase at a rate of​ 3% per year annually. His required rate of return on this investment is​ 12%. At what price would Michael be indifferent to buying or not buying the​ investment? Round off to the nearest​ $1. A. $800,000 B. $171,429 C. $240,000 D. $266,667

D. $266,667

Charlie Stone wants to retire in 30​ years, and he wants to have an annuity of​ $1,000 a year for 20 years after retirement. Charlie wants to receive the first annuity payment at the end of the 30th year. Using an interest rate of​ 10%, how much must Charlie invest today in order to have his retirement annuity​ (round to the nearest​ $10)? A. $570 B. ​$490 C. $500 D. $540

D. $540

What is the yield to maturity of a nine−year bond that pays a coupon rate of​ 20% per​ year, has a​ $1,000 par​ value, and is currently priced at​ $1,407? Assume annual coupon payments. A. 21.81% B. 6.14% C. 11.43% D. 12.28%

D. 12.28%

True or False: Adequate portfolio diversification can be achieved by investing in several companies in the same industry.

False

Millers​ Metalworks, Inc. has a total asset turnover of 2.5 and a net profit margin of​ 3.5%. The total debt ratio for the firm is​ 50%. Calculate​ Millers's return on equity. A. 19.5% B. 21.5% C. ​23.5% D. 17.5%

D. 17.5%

Tanzlin​ Manufacturing's common stock has a beta of 1.5. If the expected risk−free return is​ 2% and the expected return on the market is​ 14%, what is the expected return on the​ stock? A. 16.8% B. 13.5% C. 21.0% D. 20.0%

D. 20 = Risk free rate+ beta*(Expected return-risk free rate) = 2+1.5*(14-2)

What is the annual compounded interest rate of an investment with a stated interest rate of​ 6% compounded quarterly for seven years​ (round to the nearest​ .1%)? A. 51.7% B. 10.9% C. 6.7% D. 6.1%

D. 6.1%

You are considering the purchase of Hytec bonds that were issued 14 years ago. When the bonds were originally​ sold, they had a 30−year maturity and a​ 14.375% coupon interest rate that is payable semiannually. The bond is currently selling for​ $1,508.72. What is the yield to maturity on the​ bonds? A. 7.67% B. 14.38% C. ​11.11% D. 8.50%

D. 8.50%

Which of the following factors will influence a​ firm's P/E​ ratio? A. General market conditions B. Firm investment opportunities C. The​ investors' required rate of return D. All of the above

D. All of the above

Which of the following portfolios is clearly preferred to the​ others? Expected Standard (first column) Return Deviation (second column) A ​14% ​12% B ​22% ​20% C ​18% ​16% A. Investment C B. Investment A C. Investment B D. Cannot be determined

D. Cannot be determined

Which of the following is NOT a component of return on assets​ (ROA)? A. Total assets B. Cost of goods sold C. Sales D. Leverage

D. Leverage

All of the following are classified as non bank fin intermediaries EXCEPT: A. hedge funds B. insurance companies C. investment banks D. stock brokerages

D. Stock brokerages

Common stockholders expect greater returns than bondholders because A. in the event of​ liquidation, they are only entitled to receive any cash that is left after all creditors are paid. B. they have no legal right to receive dividends. C. they bear greater risk. D. all of the above.

D. all of the above

Jayden spends a lot of time studying charts of stocks past​ performance, but his investment return are only average. This outcome supports A. the strong form efficient market hypothesis. B. the weak−form efficient market hypothesis. C. the semi−strong form efficient market hypothesis. D. all of the above.

D. all of the above

The issuance of bonds to raise capital for a corporation A. is a cheaper form of capital than the issuance of common stock. B. increases risk to the stockholders. C. magnifies the returns to the stockholders. D. all of the above.

D. all of the above

All else​ constant, the present value of an investment will increase if A. the investment is discounted at a higher interest rate. B. the investment is discounted at a lower interest rate. C. the investment is discounted for fewer years. D. both B​ & C.

D. both B & C

True or False: A​ bond's "spread" refers to the difference between​ it's Moody's rating and its Standard​ & Poors rating.

False

The nominal interest rate A. does not include inflation. B. ignores the Fisher effect. C. is the rate at which banks lend money to other banks. D. includes inflation and the real rate of interest.

D. includes inflation and the real rate of interest

Which of the following sequences is arranged in the correct​ order, from highest long−term returns to​ lowest? A. Corporate​ bonds, treasury​ bills, international equities B. Government​ bonds, emerging market​ equities, treasury bills C. International​ equities, U.S. government​ bonds, U.S. equities D. International​ equities, U.S. government​ bonds, treasury bills

D. international equities, U.S. government bonds, treasury bills

The market risk premium is measured by A. beta. B. T−bill rate. C. standard deviation. D. market return less risk−free rate.

D. market return less risk−free rate.

Which of the following streams of income is not affected by how a firm is financed (whether debt of equity)? A. Net working capital B. Income before tax C. Net profit after tax but before dividends D. Operating income

D. operating income

Advantages of privately placing debt include all of the following except A. flexibility. B. reduced placement costs. C. speed. D. restrictive covenants.

D. restrictive covenants

Which of the following features allows a borrower to redeem or repurchase a bond issue before its maturity​ date? A. convertibility B. the priority of claims C. floating rate D. the call provision

D. the call provision

The​ P/E ratio is calculated by dividing A. the current stock price by​ stockholders' equity. B. total assets by net income. C. the current stock price by operating cash flow per share. D. the current stock price by earnings per share.

D. the current stock price by earnings per share

All of the following affect the value of a bond EXCEPT A. the coupon rate of interest. B. investors' required rate of return. C. the maturity date of the bond. D. the recorded value of the​ firm's assets.

D. the recorded value of the firm's assets

True or False: Bonds cannot be worth less than their book value.

False

True or False: A AAA rated​ bond's yield to maturity will be very close to​ it's expected yield.

True

True or False: A basis point is equal to one hundredth of a percentage point.

True

True or False: All else​ constant, an individual would be indifferent between receiving​ $2,000 today or receiving a​ $200 perpetuity when the discount rate is​ 10% annually.

True

True or False: As bond approaches​ maturity, discounts and premiums become less and less significant.

True

True or False: Debentures are unsecured long−term debt.

True

True or False: For any number of compounding periods per year greater than​ 1, EAR will always be greater than the APR.

True

True or False: In a perfectly efficient​ market, all assets would plot on the Security Market Line.

True

True or False: The longer the time to​ maturity, the more sensitive a​ bond's price to changes in market interest rates.

True

True or False: The purpose of financial markets is to bring borrowers and savers together.

True

True or False: The sensitivity of a​ bond's value to changing interest rates depends on both the​ bond's time to maturity and its pattern of cash flows.

True

True or False: The standard deviation of returns on Warchester stock is​ 20% and on Shoesbury stock it is​ 16%. The coefficient of correlation between the stocks is .75. The standard deviation of any portfolio combining the two stocks will be less than​ 20%.

True

True or False: When assets are positively​ correlated, they tend to rise or fall together.

True

Which of the following is NOT an example of systematic​ risk? A. Recession B. Interest rate risk C. Inflation D. Management risk

d. Management risk