FInal Exam Practice 2
"Junk" bonds are a street name for ________ grade bonds. A) speculative B) extremely speculative C) investment D) speculative and investment
A
Monthly interest on a loan is equal to ________. A) the beginning balance times the monthly interest rate B) the ending balance times the annual percentage rate C) the ending balance times the periodic interest rate D) the beginning balance times the APR
A
The ________ is the expiration date of the bond. A) maturity date B) coupon C) yield to maturity D) future value
A
When real property is used as collateral for a bond, it is termed a/an ________. A) mortgaged security B) indenture C) debenture D) senior bond
A
Which of the following statements is TRUE? A. Dividend payments are not tax deductible. B. Individuals do not have to pay taxes on dividend income. C. Dividends are a liability of a firm. D. A firm that skips a dividend is bankrupt.
A
Which of the statements below is FALSE? A) The profits for common stock owners come before payment to employees, suppliers, government, and creditors. B) Common stock's ownership claim on the assets and cash flow of a company is often referred to as a residual claim. C) Stock is a major financing source for public companies. D) Shareholders elect the board of directors, which ultimately selects the management team that runs the day-to-day operations of the company.
A
The ________ is the market of first sale in which companies first sell their authorized shares to the public. A) both primary and secondary markets B) primary market C) Nasdaq market D) secondary market
B
In ________, current prices already reflect the price history and volume of the stock as well as all available public information. A) weak-form efficient markets B) strong-form efficient markets C) semi-strong-form efficient markets D) operationally efficient markets
C
The constant growth dividend model requires that ________. A) the return rate g is greater than the growth rate r of the dividend stream B) we set g = 0 if the return rate r is greater than the growth rate g of the dividend stream C) the return rate r is greater than the growth rate g of the dividend stream D) the return rate r is lesser than the growth rate g of the dividend stream
C
The ________ is the yield an individual would receive if the individual purchased the bond today and held the bond to the end of its life. A) current yield B) coupon rate C) prime rate D) yield to maturity
D
MicroMedia Inc. $1,000 par value bonds are selling for $1,265. Which of the following statements is TRUE? A) The bond market currently requires a rate (yield) less than the coupon rate. B) The bonds are selling at a premium to the par value. C) The coupon rate is greater than the yield to maturity. D) All of these are true.
D
The ________ is the annual coupon payment divided by the current price of the bond, and is not always an accurate indicator. A) coupon rate B) bond discount rate C) yield to maturity D) current yield
D
Which of the following are issued with the shortest time to maturity? A) Treasury bonds B) Treasury stocks C) Treasury notes D) Treasury bills
D
To determine the interest paid each compounding period, we take the advertised annual percentage rate and simply divide it by the ________ to get the appropriate periodic interest rate. A) number of compounding periods per month B) number of discounting periods for the length of an investment C) number of compounding periods per year D) number of compounding periods for the length of an investment
C
