Exam 2 Finance

Shelf registration allows a firm to register multiple issues at one time with the SEC and then sell those registered shares anytime during the subsequent:

2 years

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

3-year; 6 percent coupon

What are non-conventional cash flows?

A combination of cash outflows and inflows.

Which one of the following statements related to annuities and perpetuities is correct?

A perpetuity comprised of $100 monthly payments is worth more than an annuity comprised of $100 monthly payments, given an interest rate of 12 percent, compounded monthly.

Ana just received the semiannual payment of $35 on a bond she owns. This is called the ______ payment.

Coupon

Which one of these statements related to preferred stock is correct?

Cumulative preferred shares are more valuable than comparable non-cumulative shares.

Chavez & Hwang just issued 15-year, 6.4 percent, unsecured bonds at par. These bonds fit the definition of which one of the following terms?

Debenture

Which one of the statements below about venture capitalists is correct?

Exit strategy is a key consideration when selecting a venture capitalist.

Mackenzie is the CEO of a privately held corporation and wants to take the company public. What is her first step?

Gain board approval.

Which one of the following will decrease the net present value of a project?

Increasing the project's initial cost at Time 0

In actual practice, managers most frequently use which two types of investment criteria?

Internal rate of return and net present value

A securities market primarily composed of dealers who buy and sell for their own inventories is referred to which type of market?

Over-the-counter

The Payback Period Rule states that a company will accept a project if:

The calculated payback is less than a pre-specified number of years.

The Internal Rate of Return (IRR) represents which of the following:

The discount rate that makes the net present value equal to zero.

Suppose you buy a 7 percent coupon, 20-year bond today when it's first issued. If interest rates suddenly rise to 15 percent, what happens to the value of your bond?

The price of the bond will fall.

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

a discount; less than

A prospectus is

a document that provides details of a proposed security offering and relevant information about the issuer.

The earliest stage of financing for a startup firm is normally provided by

an entrepreneur and their friends and family.

Privately owned Solanki Technologies will offer shares of stock to the general public to fund new research at the company. This type of equity offering would be

an initial public offering.

Protective covenants:

are primarily designed to protect bondholders.

A bond that is payable to whomever has physical possession of the bond is said to be in:

bearer form

Mutually exclusive projects are best defined as competing projects that:

both require the total use of the same limited resource.

A bond has a face value of $1,000. It can be redeemed early at the issuer's discretion for $1,015, plus any accrued interest. The additional $15 is called the:

call premium.

A call-protected bond is a bond that:

cannot be called during a given period of time.

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

capital gains yield

Which one of the following types of stock is defined by the fact that it receives no preferential treatment in respect to either dividends or bankruptcy proceedings?

common

Which one of the following compounding periods will yield the smallest present value given a stated future value and annual percentage rate?

continuous

The method of raising funds, typically in small amounts, from a large number of people over the internet is known as:

crowdfunding

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

dealer

Chavez & Hwang just issued 15-year, 6.4 percent, unsecured bonds at par. These bonds fit the definition of which one of the following terms?

debenture

The internal rate of return is defined as the:

discount rate which causes the net present value of a project to equal zero.

The length of time a firm must wait to recoup, in present value terms, the money it has in invested in a project is referred to as the:

discounted payback period.

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

dividend yield

An ordinary annuity is best defined by which one of the following?

equal payments paid at regular intervals over a stated time period

An ordinary annuity is best defined as:

equal payments paid at the end of regular intervals over a stated time period.

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

face value

The difference between the underwriters' cost of buying shares in a firm commitment and the offering price of those securities to the public is called the:

gross spread.

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

inflation

The current yield is defined as the annual interest on a bond divided by which one of the following?

market price

If a firm accepts Project A it will not be feasible to also accept Project B because both projects would require the simultaneous and exclusive use of the same piece of machinery. These projects are considered to be:

mutually exclusive.

Which one of the following methods determines the amount of the change a proposed project will have on the value of a firm?

net present value

Municipal bonds:

pay interest that is free from federal taxation.

Financing of new, nonpublic companies is broadly referred to as ________ financing.

private equity.

Non-constant growth means ____________ growth rates over some finite length of time.

supernormal

A project has a net present value of zero. Given this information:

the project's cash inflows equal its cash outflows in current dollar terms.

Current Yield is the bond's annual coupon divided by its price.

true

A perpetuity is defined as:

unending equal payments paid at equal time intervals.

The bond market requires a return of 6.2 percent on the 15-year bonds issued by Mingwei Manufacturing. The 6.2 percent is referred to as the:

yield to maturity

A bond that has only one payment, which occurs at maturity, defines which one of these types of bonds?

zero coupon