FINAN 450 Exam

The process of determining the present value of future cash flows in order to know their value today is referred to as: discounted cash flow valuation interest on interest valuation compound interest valuation complex factoring

discounted cash flow valuation

DLQ Inc. bonds mature in 12 years and have a coupon rate of 6 percent. If the market rate of interest increases, then the: yield to maturity will be less than the coupon rate market price of the bond will decrease coupon payment will increase current yield will decrease

market price of the bond will decrease

A loan where the borrower receives money today and repays a single lump sum on a future date is called a(n) _____ loan Continuous Amortized balloon pure discount

pure discount

A bond that can be paid off early at the issuer's discretion is referred to as being which type of bond? Unsecured Senior Callable Par value

Callable

The interest earned on both the initial principal and the interest reinvested from prior periods is called: Free interest simple interest compound interest interest on interest

Compound interest

A bond's principal is repaid on the ______ date? Clean Yield Dirty Maturity

Maturity

The items included in an indenture that limit certain actions of the issuer in order to protect a bondholders interests are referred to as? Trustee relationships bylaws protective covenants legal bounds

Protective covenants

With an interest-only loan the principal is: Repaid in one lump sum at the end of the loan forgiven over the loan period, thus it does not have to be repaid repaid in increasing increments through regular monthly payments

Repaid in one lump sum at the end of the loan

A bond that has only one payment, which occurs at maturity, defines which of these types of bonds? Junk Zero Coupon Callable Debenture

Zero Coupon

An ordinary annuity is best defined as:

Equal payments paid at the end of regular intervals over a stated time period