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Question 1 of 25
4.0 Points
If the inflation premium for a bond goes up, the price of the bond
A.is unaffected.
B.goes down.
C.goes up.
D.need more information
Question 2 of 25
4.0 Points
The interest factor for the present value of a single amount is the inverse of the future value interest factor.
A. True
B. False
Question 3 of 25
4.0 Points
The time value of money is not a useful concept in determining the value of a bond or in capital investment decisions.
A. True
B. False
Question 4 of 25
4.0 Points
(point) The longer the time to maturity:
A.the greater the price increase from an increase in interest rates.
B.the less the price increase from an increase in interest rates.
C.the greater the price increase from a decrease in interest rates.
D.the less the price decrease from a decrease in interest rates.
Question 5 of 25
4.0 Points
(point) As the interest rate increases, the interest factor (IF) for the present value of $1 increases.
A. True
B. False
Question 6 of 25
4.0 Points
Financial capital does not include
A.stock.
B.bonds.
C.preferred stock.
D.working capital.
Question 7 of 25
4.0 Points
The growth rate for the firm’s common stock is 7%. The firm’s preferred stock is paying an annual dividend of $3. What is the preferred stock price if the required rate of return is 8%?
A.$3.00
B.$37.50
C.$50.00
D.none of these
Question 8 of 25
4.0 Points
In paying off a mortgage loan, the amount of the periodic payment that goes toward the reduction of principal increases over the life of the mortgage.
A. True
B. False
Question 9 of 25
4.0 Points
The calculation of the cost of capital depends upon historical costs of funds.
A. True
B. False
Question 10 of 25
4.0 Points
(point) The calculation of the cost of capital depends upon historical costs of funds.
A. True
B. False
Question 11 of 25
4.0 Points
As the interest rate increases, the interest factor (IF) for the present value of $1 increases.
A. True
B. False
Question 12 of 25
4.0 Points
(point) An annuity may be defined as
A.a payment at a fixed interest rate.
B.a series of payments of unequal amount.
C.a series of yearly payments.
D.a series of consecutive payments of equal amounts.
As the time period until receipt increases, the present value of an amount at a fixed interest rate
A.decreases.
B.remains the same.
C.increases.
D.Not enough information to tell.
Question 14 of 25
4.0 Points
(point) Within the capital asset pricing model
A.the risk-free rate is usually higher than the return in the market.
B.the higher the beta the lower the required rate of return.
C.beta measures the volatility of an individual stock relative to a stock market index.
D.two of the above are true.
Question 15 of 25
4.0 Points
The risk premium is primarily concerned with business risk, financial risk, and inflation risk.
A. True
B. False
uestion 16 of 25
4.0 Points
When inflation rises, preferred stock prices fall.
A. True
B. False
uestion 17 of 25
4.0 Points
(point) If the inflation premium for a bond goes up, the price of the bond
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