FI 302 Test 2 Whaley
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 following is NOT a definition of beta?
A measure of risk that can be avoided
Beta is ________.
ALL OF THE ABOVE (a measure of nondiversifiable risk) (the appropriate measure of risk for a well-diversified portfolio) (a measure of systematic risk)
Stocks differ from bonds because:
ALL OF THE ABOVE (bond cash flows are known while stock cash flows are uncertain) (firms pay bond cash flows prior to paying taxes whiles stock cash flows are after tax.) (the ending par value of a bond is known at purchase while the ending value of a share of stock is unknown at purchase.)
Stocks differ from bonds because
ALL OF THE ABOVE (firms pay bond cash flows prior to paying taxes while stock cash flows are after tax.) (the ending par value of a bond is known at purchase while the ending value of a share of stock is unknown at purchase.) (bond cash flows are known while stock cash flows are uncertain)
Which of the statements below is TRUE?
Investors want to maximize return and minimize risk
Which of these statements below is true?
Investors want to maximize return and minimize risk.
Which of the following investments is considered to be default risk-free?
Treasury bills
If the equation E(ri)= rf + [E(rm)-rf] xi is the linear equation for the security market line, what portion represents the market risk premium for a stock that does not have a beta of 1.0?
[E(rm)-rf]
Which of the following is NOT a definition of beta?
a measure of risk that can be avoided
______ means that the percentage increase in the dividend is the same each year.
constant growth
________ means that the percentage increase in the dividend is the same each year.
constant growth
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
_______ refers to how quickly information is reflected in the available prices for trading.
informational efficiency
_________ refers to how quickly information is reflected in the available prices for trading.
informational efficiency
Which of the statements below is TRUE?
investors want to maximize return and minimize risk
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
__________ has to do with the speed and accuracy of processing a buy or sell order at the best available price.
operational effciency
_______ has to do with the speed and accuracy of processing a buy or sell order at the best available price.
operational efficiency
________ has to do with the speed and accuracy of processing a buy or sell order at the best available price.
operational efficiency
The _______ is the intercept on the Security Market Line.
risk-free rate
You can think of the _____ as the "used stock" market because these shares have been owned or "used" previously.
secondary market
Which of the following investments is considered to be default risk-free?
treasury bills
The type of risk that can be diversified away is called ____.
unsystematic risk
The type of risk that can be diversified away is called ______.
unsystematic risk
The type of risk that can be diversified away is called________.
unsystematic risk
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 efficient markets
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 efficient markets
Bonds are different from sticks because _____.
bonds promise fixed payments for the length of their maturity
Unsystematic risk
can be diversified away
The ________ is the regular interest payment of the bond.
coupon
The _______ is the interest rate printed on the bond.
coupon rate
The ________ is the interest rate printed on the bond.
coupon rate
The appropriate rate to use to discount the cash flows of a bond in order to determine the current price is the ____.
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 your eggs in one basket is an illustration of ______.
diversification
The holder of preferred stock is entitled to a constant dividend ______.
every period
The holder of preferred stock is entitled to a constant dividend ________.
every period
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
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
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
The _______ is the expiration date of the bond.
maturity date
Zero-Coupon Bonds are ____.
priced at a deep discount
Zero-Coupon Bonds are ______.
priced at a deep discount
Zero-coupon bonds are_____.
priced at a deep discount
The _____ is the market of first sale in which companies first sell their authorized shares to the public.
primary market
"Junk" bonds are a street name for ____ grade bonds.
speculative
"Junk" bonds are a street name for _______ grade bonds.
speculative
The ______ is the yield an individual would receive if the individual purchased the bond today and held the bond to the end of its life.
yield to maturity
The appropriate rate to use to discount the cash flows of a bond in order to determine the current price is the ________.
yield to maturity
The _______ is the regular interest payment of the bond.
coupon
When the ______ is less than the yield to maturity; the bond sells at a/the _______.
coupon rate; discount to
When the _______ is less than the yield to maturity, the bond sells at a/the _____.
coupon rate; discount to
The holder of preferred stock is entitled to a constant dividend_______.
every period
The value of a financial asset is the ______.
present value of all of the future cash flows
The value of a financial asset is the ______.
present value of all of the future cash flows that will be received
The value of a financial asset is the ______.
present value of all of the future cash flows that will be received.
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
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
