Question options: Baa1, A1, A3

22 Aug Question options: Baa1, A1, A3

cstem using capital and lowercase letters and numcstem using capital and lowercase letters and numbers. Below are several examples of Moody’s ratings. Which answer choice lists a collection of ratings for “high credit investment grade” bonds?

Question options:

Baa1, A1, A3

Ba1, Baa2, Baa3

Aa2, Aa3, A1

Caa, Ca, C

Question 2 2.5 / 2.5 points

A bond is a __________ instrument by which a borrower of funds agrees to pay back the funds with interest on specific dates in the future.

Question options:

long-term equity

long-term debt

short-term debt

short-term equity

Question 3 2.5 / 2.5 points

When a company is in financial difficulty and cannot fully pay all of its creditors, the first lenders to be paid are the:

Question options:

stockholders.

sinking fund holders.

juniordebtholders.

seniordebtholders.

Question 4 2.5 / 2.5 points

The __________ is the regular interest payment of the bond.

Question options:

dividend

par

coupon rate

coupon

Question 5 2.5 / 2.5 points

As the rating of a bond increases (for example, from A, to AA, to AAA), it generally means that:

Question options:

the credit rating increases, the default risk increases, and the required rate of return decreases.

the credit rating increases, the default risk decreases, and the required rate of return increases.

the credit rating increases, the default risk decreases, and the required rate of return decreases.

the credit rating decreases, the default risk decreases, and the required rate of return decreases.

Question 6 2.5 / 2.5 points

The __________ is the interest rate printed on the bond.

Question options:

coupon rate

semiannual coupon rate

yield to maturity

compound rate

Question 7 2.5 / 2.5 points

The difference between the price and the par value of a zero-coupon bond represents:

Question options:

taxes payable by the bond buyer.

the accumulated principal over the life of the bond.

the bond premium.

the accumulated interest over the life of the bond.

Question 8 2.5 / 2.5 points

Bonds are sometimes called __________ securities because they pay set amounts on specific future dates.

Question options:

variable-income

fixed-income

bully

real

Question 9 2.5 / 2.5 points

From 1980 to 2006, the default risk premium differential between Aaa-rated bonds and Aa-rated bonds has averaged between:

Question options:

50 to 150 basis points.

90 to 190 basis points.

120 to 220 basis points.

250 to 350 basis points.

Question 10 2.5 / 2.5 points

“Junk” bonds are a street name for __________ grade bonds.

Question options:

investment

speculative

extremely speculative

speculative and investment

Question 11 2.5 / 2.5 points

When the __________ is less than the yield to maturity, the bond sells at a/the __________ the par value.

Question options:

coupon rate; premium over

coupon rate; discount to

time to maturity; discount to

time to maturity; same price as

Question 12 2.5 / 2.5 points

Delagold Corporation is issuing a zero-coupon bond that will have a maturity of 50 years. The bond’s par value is $1,000, and the current yield on similar bonds is 7.5%. What is the expected price of this bond, using the semiannual convention?

Question options:

$25.19

$250.19

$750

$1,000

Question 13 2.5 / 2.5 points

When real property is used as collateral for a bond, it is termed a/an:

Question options:

debenture.

mortgaged security.

indenture.

senior bond.

Question 14 2.5 / 2.5 points

Zero-coupon U.S. Government bonds are known as:

Question options:

STRIPS.

muni-bonds.

Uncle Sam’s Empty Pockets.

BLANKS.

Question 15 2.5 / 2.5 points

With a bearer bond, whoever held it was entitled to the __________ and the __________.

Question options:

interest payments; principal

dividend payments; principal

interest payments; dividend payments

interest payments; voting rights

Question 16 2.5 / 2.5 points

Espresso Petroleum Inc. has a contractual option to buy back, prior to maturity, bonds the firm issued five years ago. This is an example of what type of bond?

Question options:

Putable bond

Callable bond

Convertible bond

Junior bond

Question 17 2.5 / 2.5 points

Which of the following is NOT an example of a bond that contains an option feature?

Question options:

Callable bond

Putable bond

Convertible bond

The above are all examples of bonds with option features.

Question 18 2.5 / 2.5 points

The __________ is the expiration date of the bond.

Question options:

future value

yield to maturity

maturity date

coupon

Question 19 2.5 / 2.5 points

The __________ is the annual coupon payment divided by the current price of the bond, and is not always an accurate indicator.

Question options:

current yield

yield to maturity

bond discount rate

coupon rate

Question 20 2.5 / 2.5 points

Which of the following statements about the relationship between yield to maturity and bond prices is false?

Question options:

When the yield to maturity and coupon rate are the same, the bond is called a par value bond.

A bond selling at a premium means that the coupon rate is greater than the yield to maturity.

When interest rates go up, bond prices go up.

A bond selling at a discount means that the coupon rate is less than the yield to maturity.

Online Exam 7

Question 21 2.5 / 2.5 points

The __________ is the market of first sale in which companies first sell

their authorized shares to the public.

Question options:

primary market

secondary market

bull market

Nasdaq market

Question 22 2.5 / 2.5 points

Which of the statements below is true?

Question options:

The profits for common stock owners come after payment to the employees, suppliers, government, and creditors.

Shareholders elect the board of directors, which ultimately selects the bondholder team that runs the day-to-day operations of the company.

Stock is a minor financing source for public companies.

Stockholders are paid before debtholders (bondholders) if a company fails.

Question 23 2.5 / 2.5 points

__________ means that the percentage increase in the dividend is the same each year.

Question options:

Constant growth

Inconsistent growth

No growth

A constant cash flow

Question 24 2.5 / 2.5 points

Which of the statements below is true?

Question options:

A problem with using the dividend growth model is that it appears to underestimate the expected return for all stocks.

A problem with using the dividend growth model is that it produces a negative expected return whenever a firm cuts dividends.

A problem with using the dividend growth model is that it produces a positive expected return whenever a firm cuts dividends.

A problem with using the dividend growth model is that it produces a negative expected return whenever a firm increases its dividends.

Question 25 2.5 / 2.5 points

If we know the dividend stream, the future price of the stock, the future selling date of the stock, and the required return, we can price stocks just as we priced:

Question options:

annuities.

perpetuities.

bonds.

preferred stocks.

Question 26 2.5 / 2.5 points

Which of the statements below is FALSE? Answer:

Question options:

The dividend model requires that a firm have a cash dividend history and that the dividend history shows a constant dividend or a positive growth in dividends.

A problem with using the dividend growth model is that it appears to underestimate the expected return for some stocks.

A problem with using the dividend growth model is that it produces a negative expected return whenever a firm cuts its dividends.

A problem with using the dividend growth model is that it appears to underestimate the expected return for all stocks.

Question 27 2.5 / 2.5 points

You can think of the __________ as the “used stock” market because these shares have been owned or “used” previously.

Question options:

secondary market

primary market

NYSE market

initial public offering market

Question 28 2.5 / 2.5 points

The hiring process for an investment banker can happen in two ways. Which of the below is one of these ways?

Question options:

Randomly choose an investment banking firm from a list of underwriting firms.

Pick a desirable investment banking firm, usually basing the choice on the reputation and history of the banker in its particular industry.

Have the primary government regulator of your industry choose the best investment banking firm for your company.

Solicit advice from a government agency and use it as your primary guide in choosing an investment banker.

Question 29 2.5 / 2.5 points

Strong-form efficient markets theory proclaims that:

Question options:

one can chart historical stock prices to predict future stock prices such that you can identify mispriced stocks and routinely outperform the market.

one can exploit publicly available news or financial statement information to routinely outperform the market.

current prices reflect the price and volume history of the stock, all publicly available information, and all private information.

current prices reflect the price and volume history of the stock, all publicly available information, but no private information.

Question 30 2.5 / 2.5 points

You buy a stock for which you expect to receive an annual dividend of $2.10 for the 15 years that you plan on holding it. After 15 years, you expect to sell the stock for 32.25. What is the present value of a share for this company if you want a 10% return?

Question options:

$7.72

$15.97

$23.69

$31.41

Question 31 2.5 / 2.5 points

You want to invest in a stock that pays $6 annual cash dividends for the next five years. At the end of the five years, you will sell the stock for $30. If you want to earn 10% on this investment, what is a fair price for this stock if you buy it today?

Question options:

$41.37

$40.37

$22.75