finance concepts test 3
When the interest rate on a bond and its yield to maturity are equal, the bond will trade at par valu
true
You hold a long-term bond yielding ten percent. If interest rates fall shortly before you sell the bond, youwill sell at a higher price than if interest rates had been constant.
true
An increase in yield to maturity would be associated with an increase in the price of a bon
false
As time to maturity increases, bond price sensitivity decreases.
false
In estimating the market value of a bond, the coupon rate should be used as the discount rate.
false
Preferred stock is compensated for not having ownership privileges witha fixed dividend stream supported by a binding contractual obligation.
false
The higher the yield to maturity on a bond, the closer to par the bond will trade.
false
The prices of financial assets are based on the expected value of future cash flows, discount rate, and past dividends.
false
The yield to maturity is always equal to the interest payment of a bond.
false
There is a negative correlation between risk and the return the investors demand
false
High-risk corporate bonds are as risky as junk bonds
true
Most bonds promise both a periodic return and a lump-sum payment.
true
Preferred stock would be valued the same as a common stock with a zero dividend growth rate.
true
The appropriate discount rate for bonds is called the yield to maturity.
true
The longer the maturity of a bond, the greater the impact on price to changes in market interest rates
true
The price of a bond is equal to the present value of all future interest payments added to the present value of the principal
true
The price of preferred stock is determined by dividing the fixed dividend payment by the required rate of return.
true
The valuation of a financial asset is based on the concept of determining the present value of future cash flows.
true
The value of a share of stock is the present value of the expected stream of future dividends.
true
Valuation of a common stock with no dividend growth potential is treated in the same manner as preferred stock.
true