fin mgt test 3
Quiz yourself by thinking what should be in
each of the black spaces below before clicking
on it to display the answer.
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| Bert owns a bond that will pay him $75 each year in interest plus a $1,000 principal payment at maturity. What is the $1,000 called? | show 🗑
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| show | face value
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| The current yield is defined as the annual interest on a bond divided by which one of the following? | show 🗑
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| Which one of these is most apt to be included in a bond’s indenture one year after the bond has been issued? | show 🗑
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| A bond that is payable to whomever has physical possession of the bond is said to be in: | show 🗑
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| Jason’s Paints just issued 20-year, 7.25 percent, unsecured bonds at par. These bonds fit the definition of which one of the following terms? | show 🗑
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| A bond that can be paid off early at the issuer's discretion is referred to as being which type of bond? | show 🗑
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| A $1,000 face value bond can be redeemed early at the issuer's discretion for $1,030, plus any accrued interest. The additional $30 is called the: | show 🗑
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| Real rates are defined as nominal rates that have been adjusted for which of the following? | show 🗑
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| The interest rate risk premium is the: | show 🗑
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| show | maturity
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| show | Long-term, taxable junk bond
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| show | Coupon rate > current yield > yield to maturity.
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| The price sensitivity of a bond increases in response to a change in the market rate of interest as the: | show 🗑
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| You expect interest rates to decline in the near future even though the bond market is not indicating any sign of this change. Which one of the following bonds should you purchase now to maximize your gains if the rate decline does occur? | show 🗑
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| Last year, Lexington Homes issued $1 million in unsecured, noncallable debt. This debt pays an annual interest payment of $55 and matures six years from now. The face value is $1,000 and the market price is $1,020. Which term is this | show 🗑
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| Are primarily designed to protect bondholders. | show 🗑
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| A "fallen angel" is a bond that has moved from: | show 🗑
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| Bonds issued by the U.S. government: | show 🗑
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| show | treasury bonds
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| show | dividend growth
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| show | dividend yield
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| show | capital gains yield
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| show | common
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| show | voting by proxy
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| What are the distributions of either cash or stock to shareholders by a corporation called? | show 🗑
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| Emst & 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? | show 🗑
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| The secondary market is best defined by which one of the following? | show 🗑
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| show | dealer
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| An agent who arranges a transaction between a buyer and a seller of equity securities is called a: | show 🗑
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| show | Priced the same as a $1 perpetuity
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| show | discount rate
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| show | the dividend growth model
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| Which one of the following applies to the dividend growth model? | show 🗑
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| Which one of the following statements is correct? | show 🗑
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| Supernormal growth is a growth rate that: | show 🗑
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| show | $12.32
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| show | $9.83
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| show | $26.94
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| The common stock of Water Town Mills pays an annual dividend of $1.84 a share. The company has promised to maintain a constant dividend even . How much are you willing to pay for one share of this stock if you want to earn a 13.6 percent annual return? | show 🗑
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| show | net present value
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| 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? | show 🗑
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| The length of time a firm must wait to recoup the money it has invested in a project is called the: | show 🗑
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| show | internal rate of return
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| If a firm accepts Project A it will not be feasible to also accept Project B because both projects would require the simultaneous and exclusive use of the same piece of machinery. These projects are considered to be: | show 🗑
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| A project has a net present value of zero. Which one of the following best describes this project? | show 🗑
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| Which one of the following will decrease the net present value of a project? | show 🗑
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| show | net present value
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| analyzing a project that requires $180,000 of fixed assets. When the project ends, those assets are expected to have an aftertax salvage value of $45,000. How is the $45,000 salvage value handled when computing the net present value of the project? | show 🗑
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| show | An increase in the aftertax salvage value of the fixed assets.
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| show | Is the best method of analyzing mutually exclusive projects.
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| show | Liquidity bias, ease of use.
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| Which one of the following statements related to the internal rate of return (IRR) is correct? | show 🗑
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| The internal rate of return is: | show 🗑
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| show | crossover rate
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| show | The project that is preferred at a discount rate of 11 percent will be the opposite project of that preferred at a discount rate of 12 percent.
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| Project A creating an outdoor eating area on the unused portion of the restaurant's property. Project B would use space for creating a drive-thru window which project to accept, the firm should rely most heavily on which one of the following methods? | show 🗑
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| Mutually exclusive projects are best defined as competing projects that: | show 🗑
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| show | Accept Project B and reject Project A based on the NPVs.
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| show | $2,971.13
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