Finance 302 Test 2 Questions & Answers
Trials Inc. has issued 30-year $1,000 face value, 10% annual coupon bonds, with a yield to maturity of 9.0%. The annual interest payment for the bond is_______
100$
Which of the statements below is true 1.Investors want to maximize return and minimize risk 2.Investors want to maximize return and maximize risk 3.Investors want to minimize return and maximize risk 4.Investors want to minimize return and minimize risk
Investors want to maximize return and minimize risk
Which of the following investments is considered to be default risk-free?
Treasury bills
The _______ is a market derived interest rate used to discount the future cash flows of the bond.
Yield to maturity
Stocks differ from bonds because:
all of the above
beta is 1.the appropriate measure of risk for a well diversified portfolio 2.a measure of systematic risk 3. a measure of nondiversifiable risk 4.all of the above
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 regular interest payment of the bond
coupon
The _______ is the interest rate printed on the bond.
coupon rate
When the ___ is less than the yield to maturity, the bond sells at a/the ___ the par value.
coupon rate; discount to
The practice of not putting all of you eggs in one basket is an illustration of ______
diversification
The holder of preferred stock is entitled to a constant dividend
every period
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
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
_______ has to do with the speed and accuracy of processing a buy or sell order at the best available price
operational efficiency
The value of a financial asset is the _____
present value of all of the future cash flows that will be received
Zero-coupon Bonds are
priced at a deep discount
You can think of the ______ as the "used stock" market because these shares have been owned or used previously
secondary market
In ______, current prices already reflect the price history and volume of the stock as well as all available public information
semi-strong-form efficient markets
"Junk" bonds are a street name for ______ grade bonds.
speculative
_______ is risk that cannot be diversified away.
systematic risk
In _________, current prices reflect the price history and trading volume,e of the stock. It is of no use to chart historical stock prices to predict future stock prices such that you can identify mispriced stocks and routinely outperform the market
weak-form efficient markets