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fin systems quizes
| Question | Answer |
|---|---|
| If interest rates increase, the value of a bond decreases and vice versa. | true |
| The greater a security's coupon the lower the security's price sensitivity to an interest rate change, ceteris paribus. | true |
| a bond with an 11% coupon and 9% required return will sell at a premium to par | true |
| the longer the time to maturity the lower the security's price sensitivity to an interest rate change, ceteris paribus. | false |
| For a given interest rate change, a 20 year bond's price change will be twice that of a 10 year bond's price change. | false |
| Suppose two bonds of equivalent risk and maturity have different prices such that one is a premium bond and one is a discount bond. The premium bond must have a greater expected return than the discount bond. | false |
| A 15 year corporate bond ($1,000 par) pays $40 interest every sixmonths. What is the bond’s price if the bond's promised ytm is 5.5% | 1,253.12 |
| Any security that returns a greater percentage of the price sooner is less price volatile. | true |
| The common stock of ACME just paid a $1.00 dividend per share, but its dividend is expected to grow at 4% per year forever. It has a 12% required return. How much should you be willing to pay for a share of the stock? | 13 |
| A fairly priced bond with a coupon less than the expected return must sell at a discount from par. | true |
| An 8 year corporate bond ($1,000 Par) pays has a 7% coupon rate. What should be the bond’s price if the required return is 6% and the bond pays interest semiannually | 1062.81 |
| Which one of the following bonds is likely to have the highest required rate of return, ceteris paribus? | AA rated callable corporate bond without a sinking bond |
| Interest income from Treasury securities is _____, and interest income from municipal bonds is always | taxable at federal level only; exempt from federal taxes |
| An unsecured bond that has no specific collateral other than the general creditworthiness of the issuing firm is called a debenture. | true |
| Which of the following is/are true about callable bonds? | II and IV only will normally be called after interest rates drop and have higher required return that non-callable bonds |
| A Treasury security in which periodic coupon interest payments can be separated from each other and from the principal payment is called a | STRIP |
| T-notes and T-bonds are issued in minimum denominations of $1,000 or multiples of $1,000. | true |
| With respect to private placements of bonds, which of the following is correct? | I,II, and III only |
| Convertible bonds are | bonds that may be converted to a certain number of shares of stock determined by the conversion ratio |
| When an investment banker purchases an offering from a bond issuer and then resells it to the public this is known as a | firm commitment |
| the largest type of municipal bonds outstanding are | general obligation bonds |
| ane purchased 100 shares of ABC stock at price of $44. One year later, she received a $1 per share dividend payment, and ABC's stock price had fallen to $41. What was her one-year return on this stock? | -4.55% |
| Securities that are not traded on an organized exchange such as NYSE and AMEX are: | traded over the counter |
| is a computerized system that automatically matches orders between buyers and sellers, serving as an alternative to traditional market making and floor trading. | an electronic communication network (ECN) |
| A/an __________________ enables stockholders to vote in an annual stockholders' meeting by absentee ballot, or to authorize others to vote on their behalf. | proxy |
| The two basic types of corporate stock are: | common and preferred |
| One kind of primary market stock sale is a __________________ offering, where the issuing firm already has existing shares outstanding and trading in the secondary market. | seasoned |
| egally, the holders of common stock are in a/an _______________ with the issuing corporation | ownership portion |
| Jack bought 100 shares of Google stock at $290 per share. At the end of one year, Google was priced at $265 per share. No dividends were paid. What was Jack's one-year return? | -8.62% |
| Prior to the public sale of stock, the _____________________ will be distributed to potential buyers. It is a preliminary version of the prospectus. | red herring |
| Some corporations are organized as __________________ firms, meaning that the firm has two classes of common stock outstanding, each having different voting rights for the investors. | dual-class |
| With _____________________ preferred stock, the preferred stockholders could receive dividend payments in excess of the regular, stated amount. | participating |
| The __________________ feature of common stock means that losses of stockholders are limited to the amount of their original investment. | limited liability |
| interest rate can go up or down during the life of a bond PV (value of a bond) is inversely related to interest rate | interest rate risk |
| when the interest rate goes up | the bond value goes down |
| _______________ is an unsecured bond, and one that's in a lower-priority position relative to other unsecured bonds issued by the same company. | a subordinate debenture |
| A/an__________________ is issued with a number of different maturity dates. A portion of the overall issue is scheduled to be repaid on each maturity date. | serial bond |
| The ___________________ is the contract between the bond issuer and the bond investor | indenture |
| a revenue bond is a | municipal bond, to be paid off by cash generated from a particular project |
| Inflation-indexed bonds, issued by the U.S. Treasury, are called: | TIPS |
| A bond issue sold with a/an __________________ will require the issuer to make payments to the bond's trustee over time. The resulting cash proceeds will be used to retire the bonds. | sinking fund provision |
| A ________________ permits the investor to exchange the bond for shares of the issuing firm's common stock. | convertible bond |
| Common stocks typically have which of the following that bonds do not have: | 1-voting rights |
| bearer bonds are bonds | with coupons attached that are redeemable by whoever has the bond |
| standard revenue bonds are | collateralized by the earnings from a specific project |
| With _________ voting, all directors up for election are voted on by the shareholders at the same time in one general election. | cumulative |
| 40. If all preferred dividend payments that have been missed must be paid before any common stock dividend can be paid the preferred stock is called _____ preferred stock. | cumulative |
| 41. In 2007 the NYSE merged with _________________. | euronext |
| 42. The preemptive right is designed to _________ | allow existing shareholders to buy shares of the new offering if they desire |
| 43. In terms of volume of trading and market value of firms traded the ________ is the largest U.S. stock market. In terms of number of firms traded the ___________ is the largest in the U.S. | NYSE; NASDAQ |
| 44. Which of the following indices are value weighted? | I, II, and III |
| 45. The largest single type of holder of common stock ($) is . | households |
| 46. In a ___________ offering the firm preregisters with SEC any securities it wishes to sell over the next two years. | shelf |
| 47. The NYSE specialists are charged with . | I,II, and III |
| 48. The electronic based market for less actively traded U.S. securities is the . | OTC bullentin board |
Created by:
rcu10