FIN310 Exam 1-Set 2

4. Mike just purchased a bond which pays $40 each year in interest. The $40 interest payment is also called the: A. coupon. B. par value. C. discount. D. call premium. E. yield. F. None of the above.

A. coupon.

14. At the end of fiscal year 2011, Crane Industries, Inc.'s stock price was $30.75. A year later it was $34.88. Per share dividends over the year were $0.55, while earnings per share were $1.33. What was the dividend yield in fiscal year 2012? A. 1.79% B. 4.33% C. 13.43% D. 15.22% E. 17.76% F. None of the above.

A. 1.79% Dividend yield = 0.55/30.75 = 1.79%

5. Zack owns a bond that will pay him $35 each year in interest plus a $1,000 principal payment at maturity. The $1,000 principal payment is called the: A. coupon. B. par value. C. discount. D. yield. E. call premium. F. None of the above.

B. par value.

15. At the end of fiscal year 2011, Crane Industries, Inc.'s stock price was $30.75. A year later it was $34.88. Per share dividends over the year were $0.55, while earnings per share were $1.33. What was the percentage change in the share price in fiscal year 2012? A. 1.79% B. 4.33% C. 13.43% D. 15.22% E. 17.76% F. None of the above.

C. 13.43% Percentage change in share price = (34.88- 30.75)/30.75 = 4.13/30.75 = 13.43%.

1. Which one of the following statements is false? A. Financial executives must design financial securities to meet the needs of the firm and its investors .B. Financial instruments are subject to full disclosure requirements. C. Financial instruments are greatly constrained by law and regulation. D. Financial instruments are claims against a company's cash flows and assets. E. None of the above.

C. Financial instruments are greatly constrained by law and regulation.

3. Which of the following securities has a purely residual claim against a firm's cash flows? A. preferred stock B. callable bonds C. common stock D. non-callable bonds E. None of the above.

C. common stock

7. Which one of the following accurately orders the rate of return on financial securities from highest to lowest over most of recorded market history (the 1900-2015 period)? A. Short-term government bills, long-term corporate bonds, long-term government bonds, common stocks B. Long-term corporate bonds, long-term government bonds, common stocks, short-term government bills C. Common stocks, long-term government bonds, long-term corporate bonds, short-term government bills D. Common stocks, long-term corporate bonds, long-term government bonds, short-term government bills E. Long-term corporate bonds, common stocks, short-term government bills, long-term government bonds F. None of the above.

D. Common stocks, long-term corporate bonds, long-term government bonds, short-term government bills

2. Which of the following securities has a purely fixed claim against a firm's cash flows? A. preferred stock B. options C. common stock D. bonds E. None of the above.

D. bonds