mgmt 310 exam 2 :(

The dividend growth model:

Requires the growth rate to be less than the required return.

A premium bond that pays $60 in interest annually matures in seven years. The bond was originally issued three years ago at par. Which one of the following statements is accurate in respect to this bond today?

YTM < coupon rate

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

a discount; less than

Which one of following is the rate at which a stock's price is expected to appreciate?

capital gains yield

the interest rate risk premium is the:

compensation investors demand for accepting interest rate risk

The price sensitivity of a bond increases in response to a change in the market rate of interest as the:

coupon rate decreases and time to maturity increases

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

discount rate

A discount bond's coupon rate is equal to the annual interest divided by the:

face value

Which one of the following risk premiums compensates for the inability to easily resell a bond prior to maturity?

liquidity

Which bond would you generally expect to have the highest yield?

long term, taxable junk bond

The annual dividend yield is computed by dividing _____ annual dividend by the current stock price.

next year's

the yields on a corporate bond differ from those on a comparable Treasury security primarily because of:

taxes and default risk

Round Dot Inns is preparing a bond offering with a coupon rate of 6 percent, paid semiannually, and a face value of $1,000. The bonds will mature in 10 years and will be sold at par. Given this, when woudl the bonds sell at a premium?

the bonds will sell at a premium if the market rate is 5.5%

A Treasury yield curve plots Treasury interest rates relative to:

time to maturity

Which one of these equations applies to a bond that currently has a market price that exceeds par value?

yield to maturity < coupon rate

Which one of the following premiums is compensation for the possibility that a bond issuer may not pay a bond's interest or principal payments as expected?

default risk