FI 302 Test 2

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Trials. Inc has issued a 30 year, $1000 face value, 10% annual coupon bonds, with a YTM of 9%. The annual interest payment for the bond is

$100

The _____ is the regular interest payment of the bond

Coupon

The terms ______ and _____ mean the same thing

Diversifiable risk and unsystematic risk

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

Operational efficiency

Junk bonds are street names 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

_____ means that the percentage increase in the dividend is the same each year

constant growth

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

investors want to

minimize risk and maximize return

The holder of preferred stock is entitled to a constant dividend______

every period.

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

Bonds are different from stocks because

bonds promise fixed payments for the life of their maturity

The ____ is the interest rate printed on the bond

coupon rate

When the ____ is less than the YTM, the bond sells at a/the ______ the par value

coupon rate; discount rate

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 and risk free security

The ____ is the expiration date of the bond

maturity date

The value of a financial asset is the

present value of all the future cash flows that will be received

Zero coupon bonds are

price at a deep discount

The_____ is the market of first sale in which companies first sell their authorized shares to the public

primary market

The _____ is the intercept on the security market line

risk free rate

Beta is

the appropriate measure of risk for a well diversified portfolio a measure of systematic risk a measure of non-diversifiable risk

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

treasury bills


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