FIN 302 Exam 1

Call premium

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:

List of collateral used as bond security

A corporation issued bonds three years ago. Which one of the following is most apt to be included in the bond's indenture?

Cannot lease any major assets without bondholder approval

An example of a negative covenant that might be found in a bond indenture is a statement that the company

- Auditor independence - Certification of financial statements by management - Enhanced disclosure of financial data

Describe 3 features of the sarbanes-oxley act of 2002

Often contain alternative options based on economic developments

Financial plans:

Managers

The Sarbanes-Oxley Act of 2002 holds a public company's ___ responsible for the accuracy of the company's financial statements

maximize the value of the corporation to the stockholders

The ultimate financial goals of a corporation is to:

Vice president of finance

Usually the treasurer of a corporation reports directly to the

Internal growth rate

Wei Bridal is a profitable firm with a dividend payout ration of 25%. The firm does not want to issue additional equity shares nor increase its long-term debt. Which one of the following defines the maximum rate at which this firm can currently grow?

Projected sales

When preparing pro forma statements, which one of the following is an analyst most like to estimate first?

Even if the dividend amount and growth rate remain constant, the value of a stock can vary.

Which of the following applies to the dividend growth model?

3-year;6 percent coupon

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

Long-term zero coupon

You expect interest rates to decline in the near future even though the bond market is not indicating any sign of this change. Which one of the following bonds should you purchase now to maximize your gains if the rate decline does occur?

- managers may not attempt to maximize the value of the firm to shareholders - of the separation of owenership and management - shareholders incur monitoring costs

a corporation may incur agency costs because:

Is currently operating at full capacity

a pro forma statement indicates that both sales and fixed assets are projected to increase by 7% over their current levels. Given this, you can safely assume the firm:

Protective covenants

are primarily designed to protect bondholders