FREE AND STUDY GAMES ABOUT FIN300 UNIT 2 EXAM

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FREE AND STUDY GAMES ABOUT FIN300 UNIT 2 EXAM

QUESTIONS

Actual Qs and Ans Expert-Verified Explanation

This Exam contains:

-Guarantee passing score -54 Questions and Answers -format set of multiple-choice -Expert-Verified Explanation Question 1: What rates represents the change, if any, in your purchasing power as a result of owning a bond?

Answer:

Real rate

Question 2: Interest rate risk is higher for

Answer:

• low coupon rate bonds than high coupon rate bonds
• long-term bonds than short-term bonds.

Question 3: Preferred stock may have all of the following characteristics in common with bonds

with the exception of:

Answer:

tax-deductible payments

Question 4: Default risk is

Answer:

the risk that the bond issuer does not pay the promised payments in the full amount or on time

Question 5: Which one of the following best describes Nasdaq?

Answer:

Computer network of securities dealers Question 6: 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?

Answer:

The price of the bond will fall.

Question 7: The formula for the bond price includes

Answer:

both the formula for the present value of an annuity and the formula for the present value of a lump sum Question 8: True or false: Given a positive rate of inflation, the real rate must be less than the nominal rate

Answer:

true

Question 9: A bond's principal is repaid on the ________ date.

Answer:

maturity Question 10: 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?

Answer:

Common Question 11: All else constant, a bond will sell at _____ when the coupon rate is _____ the yield to maturity

Answer:

a discount; less than Question 12: Ernst & Frank stock is listed on Nasdaq. The firm is planning to issue some new equity shares for sale to the general public. This sale will definitely occur in which one of the following markets?

Answer:

primary

Question 13: 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:

Answer:

call premium Question 14: Recently, you discovered a convertible, callable bond with a semiannual coupon of

5 percent. If you purchase this bond you will have the right to:

Answer:

convert the bond into equity shares.

Question 15: Which one of the following applies to a premium bond?

Answer:

Coupon rate > Current yield > Yield to maturity Question 16: A Treasury yield curve plots Treasury interest rates relative to:

Answer:

time to maturity.

Question 17: NYSE designated market makers

Answer:

acts as a dealer

Question 18: as interest rates decrease, bond prices

Answer:

increase Question 19: Municipal bonds:

Answer:

pay interest that is free from federal taxation.

Question 20: Bond payments

Answer:

generally have low daily trading volume in any single bond issue, are made up primarily of over-the-counter transactions, trade in an extremely large number of bond issues.

Question 21: Interest rates that include an inflation premium are referred to as:

Answer:

nominal rates.Question 22: A securities market primarily composed of dealers who buy and sell for their own inventories is referred to which type of market?

Answer:

over the counter Question 23: When pricing bonds with semiannual coupon payments using the time value of money function on our calculator, we must

Answer:

both double the number of years for the N input and take half the annual yield to maturity for the I/Y input Question 24: Dilan owns a bond that will pay him $45 each year in interest plus $1,000 as a

principal payment at maturity. The $1,000 is referred to as the:

Answer:

face value

Question 25: A dirty bond price refers to

Answer:

the clean price plus accrued interest Question 26: Which one of the following methods of project analysis is defined as computing the value of a project based on the present value of the project's anticipated cash flows?

Answer:

Discounted cash flow valuation Question 27: Which one of the following methods of analysis provides the best information on the benefits to be received from a project per dollar invested?

Answer:

Profitability index