FI 331 Test 2
which of the following is NOT a definition of beta
A measure of risk that can be avoided
which of the following provides the best description of common stock
a claim on residual earnings after all other claimholders have been paid
beta is
all of the above
stocks differ from bonds because
all of the above
_________ means that the percentage increase in the dividend is the same each year
constant growth
is the regular interest payment of the bond
coupon
when the ________ is less than the yield to maturity, the bond sells at the ________ the par value
coupon rate, discount to
the terms ___________ and ____________ mean the same thing
diversifiable risk; unsystematic risk
the practice of not putting all of your 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
________________ has to do with the speed and accuracy of processing a buy or sell order at the best available price
operational effciency
zero coupon bonds are
priced at a deep discount
the ________ is the market of first sale in which companies first sell with their authorized shares to the public
primary market
as general interest rates fall, bond prices
rise
"junk" bonds are a street name for _________ grade bonds
speculative
_________ is risk that cannot be diversified away
systematic risk
a security with a beta of 0.7 indicates which of the following
the security carries less risk than the market
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 mispriced stocks and routinely outperform the market
weak-form effcient markets
the appropriate rate to use to discount the cash flow of a bond in order to determine the current price is
yield to maturity
