Set 2 - Financial Markets

Which of the following securities has a purely fixed claim against a firm's cash flows?

bonds

Which one of the following statements is false? a. Financial executives must design financial securities to meet the needs of the firm and its investors. b. Financial instruments are subject to full disclosure requirements. c. Financial instruments are greatly constrained by law and regulation. d. Financial instruments are claims against a company's cash flows and assets.

c. Financial instruments are greatly constrained by law and regulation.

Which of the following securities has a purely residual claim against a firm's cash flows?

common stock

Which of the following accurately orders the rate of return on financial securities from highest to lowest over most of recorded market history (the 1900-2015 period)?

common stocks, long-term corporate bonds, long-term government bonds, short-term government bills

Mike just purchased a bond which pays $40 each year in interest. The $40 interest payment is also called the:

coupon

At the end of fiscal year 2011, Crane Industries, Inc.'s stock price was $30.75. A year later it was $34.88. Per share dividends over the year were $0.55, while earnings per share were $1.33. What was the dividend yield in fiscal year 2012?

1.79% Dividend yield = (0.55/30.75) = 1.79%

At the end of fiscal year 2011, Crane Industries, Inc.'s stock price was $30.75. A year later it was $34.88. Per share dividends over the year were $0.55, while earnings per share were $1.33. What was the percentage change in the share price in fiscal year 2012?

13.43% Percentage change in share price = (34.88 - 30.75)/30.75 = (4.13/30.75) = 13.43%

Zack owns a bond that will pay him $35 each year in interest plus a $1,000 principal payment at maturity. The $1,000 principal payment is called the:

par value