finance 325 exam 2
Which one of the following applies to the dividend growth model?
Even if the dividend amount and growth rate remain constant, the value of a stock can vary.
A discount bond's coupon rate is equal to the annual interest divided by the:
Face value
Bert owns a bond that will pay him $45 each year in interest plus $1,000 as a principal payment at maturity. What is the $1,000 called?
Face value
A bond's principal is repaid on the ________ date.
Maturity
National Trucking has paid an annual dividend of $1.00 per share on its common stock for the past fifteen years and is expected to continue paying a dollar a share long into the future. Given this, one share of the firm's stock is:
Priced the same as $1 perpetuity
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 applies to a premium bond?
Coupon rate > Current yield > Yield to maturity
Hardy Lumber has a capital structure that includes bonds, preferred stock, and common stock. Which one of the following rights is most apt to be granted to the preferred shareholders?
Right to share in company profits prior to other shareholders
If a project has a net present value equal to zero, then:
the project earns a return exactly equal to the discount rate
If a project has a net present value equal to zero, then:
the project earns a return exactly equal to the discount rate.
Winston Co. has a dividend yield of 5.4 percent and a total return for the year of 4.8 percent. Which one of the following must be true?
the stock has a negative capital gains yield
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
The bond market requires a return of 9.8 percent on the 5-year bonds issued by JW Industries. The 9.8 percent is referred to as the:
yield 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
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, which one of the following statements is correct?
The bonds will sell at a premium if the market rate is 5.5 percent
A $1,000 par value corporate bond that pays $60 annually in interest was issued last year. Which one of these would apply to this bond today if the current price of the bond is $996.20?
The current yield exceeds the coupon rate.
Winston Co. has a dividend yield of 5.4 percent and a total return for the year of 4.8 percent. Which one of the following must be true?
The stock has a negative capital gains yield
All else constant, a bond will sell at _____ when the coupon rate is _____ the yield to maturity.
a discount; less than
A bond that is payable to whomever has physical possession of the bond is said to be in:
bearer form.
An agent who arranges a transaction between a buyer and a seller of equity securities is called a:
broker
What is the model called that determines the market value of a stock based on its next annual dividend, the dividend growth rate, and the applicable discount rate?
constant growth model
Allison just received the semiannual payment of $35 on a bond she owns. Which term refers to this payment?
coupon
An agent who maintains an inventory from which he or she buys and sells securities is called a:
dealer
What are the distributions of either cash or stock to shareholders by a corporation called?
dividends
National Trucking has paid an annual dividend of $1 per share on its common stock for the past 15 years and is expected to continue paying a dollar a share long into the future. Given this, one share of the firm's stock is:
priced the same as a $1 perpetuity
A project has an initial cost of $31,800 and a market value of $29,600. What is the difference between these two values called?
Net Present Value
Net present value:
is the best method of analyzing mutually exclusive projects.
Dixie South currently pays an annual dividend of $1.46 a share and plans on increasing that amount by 2.75 percent annually. Northern Culture currently pays an annual dividend of $1.42 a share and plans on increasing its dividend by 3.1 percent annually. Given this information, you know for certain that the stock of Northern Culture has a higher ________ than the stock of Dixie South.
Capital gains yield
Which one of the following statements is correct?
Stocks can have negative growth rates.
A project has a net present value of zero. Which one of the following best describes this project?
The project's cash inflows equal its cash outflows in current dollar terms.
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 Fisher effect primarily emphasizes the effects of ________ on an investor's rate of return.
inflation
The current yield is defined as the annual interest on a bond divided by the:
market price
The annual dividend yield is computed by dividing ________ annual dividend by the current stock price
next year's
DLQ Inc. bonds mature in 12 years and have a coupon rate of 6 percent. If the market rate of interest increases, then the:
Market price of the bond will decrease
Winston Co. has a dividend yield of 5.4 percent and a total return for the year of 4.8 percent. Which one of the following must be true?
The stock has a negative capital gains yield.
Jason's Paints just issued 20-year, 7.25 percent, unsecured bonds at par. These bonds fit the definition of which one of the following terms?
debenture
Rosita paid a total of $1,189, including accrued interest, to purchase a bond that has 7 of its initial 20 years left until maturity. This price is referred to as the:
dirty price
Which one of the following represents the capital gains yield as used in the dividend growth model?
g
