Finance MC- Chapter2

Calendar Enterprise stock is listed on NASDAQ. The firm is planning to issue some new equity shares for sale to the general public. This sale will occur in which of the following markets?

primary

The items included in the indenture that limit certain actions of the issuer in order to protect bondholders interests are reffered to as the:

protective covenants

Which of the following is least sensitive to an interest rate risk?

short time, high coupon

An increase in which of the following will increase the current value of a stock according to the dividend growth model?

1. Dividend amount 2. number of future dividends, provided the current number is less than infinite 3. dividend growth rate

An 8% corporate bond that pays interest semi-annually was issued lat year. Which two of thew following most likely apply to this bond today if the current YTM is 7%.

1. a structure as an interest-only bond 2. a market price that differs from the FV

Which of the following relationships apply to a par value bond?

1. current yield= yield to maturity 2. market price = face value

Which of the following increase th price sensitivity of a bond to changes in interest rates?

1. increase in time to maturity 2. decrease in coupon rate

A bond has a market price that exceeds its face value. Which of the following features correctly apply to this bond?

1. premium price 2. YTM that is less than the coupon rate

Which one of the following transactions occurs in the primary market?

a purchase of a newly issued stock from AT&T

An ECN is best described as:

a website that allows individual investors to trade directly with one another

Mary just purchased a bond which pays $60 a year in interest. What is the $60 caked?

coupon

An agent who maintains an inventory from which he or she buys and sells securities is called:

dealer

All else held constant, a bond will sell at a ____ when the coupon rate is ____ the yield to maturity.

discount, less than

Which one of the following is computed by dividing next year's annual dividend by the current stock price?

dividend yield

Real rates are nominal rates that have been adjusted for which of the following?

inflation

Interest rates that include an inflation premium are referred to as:

nominal rates

Which one of the following is a type of equity security that has a fixed dividend and a priority status over other equity securities?

preferred stock

You cannot attend the shareholder's meeting for Alpha United so you authorize another shareholder to vote on your behalf. WHat is the granting of this authority called?

voting by proxy