Finance 302 Exam #2

Speculative

"Junk" bonds are a street name for ________ grade bonds.

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 __________.

Long-term Debt

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.

All of the Above

Beta is ___________.

Bonds promise fixed payments for the length of their maturity.

Bonds are different from stocks because ____________.

[E(fm)-rf]

If the equation E(r)=rf+[E(fm)-rf]x. is the linear equation for the Security Market Line, what portion represents the market risk premium for a stock that does not have beta of 1.0?

Semi-strong form efficient markets

In _________, current prices reflect the price history and trading volume of the stock as well all available public information.

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.

All of the above

Stocks differ from bonds because:

Coupon

The ________ is the regular interest payment of the bond.

Coupon Rate

The __________ is the Interest rate printed on the bond.

Maturity Date

The ___________ is the expiration date of the bond.

Yield to Maturity

The ____________ is a market derived interest rate used to discount the future cash flows.

Every Period

The holder of a preferred stock is entiled to a constant dividend ___________.

Diversification

The price of not putting all your eggs in one basket is an illustration of __________.

Diversifiable risk; unsystematic risk

The terms ________ and _______ mean the same thing.

Present value of all the future cash flows that will be received.

The value of a financial asset is the ________.

$100

Trials Inc. has issued a 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_______.

can be diversified away

Unsystematic risk

Coupon Rate; Discount to

When the ________ is less than the yield to maturity, the bond sells at the ________ the par value.

Treasury Bills

Which of the following investments is considered to be default risk-free?

A measure of risk that can be avoided

Which of the following is NOT a definition of beta?

secondary market

You can think of the __________ as the "used stock" market because these shares have been owned or "used" previously.

Priced at a deep discount

Zero-Coupon Bonds are _________.

Informational efficiency

________ refers to how quickly information is reflected in the available prices for trading.

Systematic Risk

_________ is a risk that cannot be diversified away.

Constant growth

_________ means that the percentage increase in the dividend is the same each year.

Operational efficiency

__________ has to do with the speed and accuracy of processing a buy or sell order at the best available price.