Finance Ch 7 & 8

The bond market requires a return of 9.8% on the 5 year bonds issued by JW industries. The 9.8% is referred to as which of the following Yield to Maturity
A bond that can be paid off early at the issuer’s discretion is referred to as being which type of bond Callable
The items included in an indenture that limit certain actions of the issuer in order to protect a bondholder’s interests are referred to as the Protective Covenants
The difference between the price that a dealer is willing to pay and the price at which he or she will sell is called the Spread
Real rates are defined as nominal rates that have been adjusted for Inflation
The pure time value of money is known as the Term Structure of interest rates
Which one of the following premiums is compensation for the possibility that a bond issuer may not pay a bond’s interest or principal payments as expected? Default Risk
Which bond would you generally expect to have the highest yield Long-term, taxable junk bond
A bond has a market price that exceeds its face value. Which one of these features currently applies to this bond YTM is less than coupon rate
DLQ Inc. bonds mature in 12 years and have a coupon rate of 6%. If the market rate of interest increases, then the Market Price of the bond will decrease
Defines the relationship between real rates, nominal rate, and inflation The Fisher Effect = (1 + Nominal Rate) = (1 + real rate)(1 + inflation rate)
Model that determines the present value of a stock based on its next annual dividend, the dividend growth rate, and the applicable discount rate Dividend Growth Model
Computed by dividing next year’s annual dividend by current stock price Dividend Yield
The rate at which a stock’s price is expected to appreciate Capital gains yield
Stock that receives no preferential treatment in respect to either dividends or bankruptcy proceedings Common
You cannot attend the shareholder’s meeting for Alpha United so you authorize another shareholder to vote on your behalf. What is the granting of this authority called? Voting by proxy
Equity security that has a fixed dividend and a priority status over other equity securities Preferred stock
Market where outstanding shares of stock are resold Secondary Market
A decrease in ____ will increase the current value of a stock according to the dividend growth model Discount Rate
If you expect the market rate of return to increase across the board on all equity securities, then you should also expect A decrease in all stock values

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