FN 312 Ch. 7 and 8 Quiz

A person on the floor of the NYSE who executes buy and sell orders on behalf of customers is called a:

floor broker

Which one of the following represents the capital gains yield as used in the dividend growth model?

g

Treasury Bonds are:

generally issued as semiannual coupon bonds

A zero coupon bond:

has more interest rate risk than a comparable coupon bond

Callable Bonds generally:

have a sinking fund provision

A "fallen angel" is a bond that has moved from

investment grade to speculative grade

Supernormal growth is a growth rate that:

is unsustainable over the long term.

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

liquidity

The current yield is defined as the annual interest on a bond divided by the

market price

The owner of a trading license for the NYSE is called a:

member

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

next year's

Allison just received the semiannual payment of 35 dollars on a bond she owns. Which refers to this payment?

Coupon

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

A discount bonds 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 a $1,000 principal payment at maturity. What is the $1,000 called?

Face Value

The difference between the price that a dealer is willing to pay and the price at which he or she will sell is called the:

Spread

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

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

Yield to maturity< coupon rate

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

a discount; less than

The bond market requires a return of 9.8% on the 5 year bonds issued by JW Industries. The 9.8 % is referred to as the:

yield to maturity

Bonds issued by the US government

are considered to be free of default risk

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

An agent who arranges a transaction between a buyer and a seller of equity securities is called a:

broker

A 1000 dollar face value bond can be redeemed early at the issuer's discretion for 1030, plus any accrued interest. The additional 30 is called the:

call premium

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

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

coupon rate decreases and the time to maturity increases

Which one of the following relationships applies to a par value bond?

coupon rate= current yield= yield to maturity

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

dealer

A member who acts as a dealer in a limited number of securities on the floor of the NYSE is called a:

designated market maker

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

discount rate

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

Municipal Bonds

pay interest that is federally tax free

Which one of the following rates represents the change, if any, in your purchasing power as a result of owning a bond?

real rate

The Dividend Growth Model

requires the growth rate to be less than the required return

The yields on a corporate bond differ from those on a comparable treasury security primarily because of:

taxes and default risk

A treasury yield curve plots treasury interest rates relative to

time to maturity

The secondary market is best defined as the market:

where outstanding shares of stock are resold