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