Yield to maturity on a bond with price equal to its par value will​ ________.A. be more than the coupon rateB.always be equal to the coupon rateC.be less than or equal to the coupon rate depending on the required returnD.be less than the coupon rate B.always be equal to the coupon rate
If the required return is greater than the coupon​ rate, a bond will sell at​ ________.A. book valueB.a discountC.a premiumYour answer is not correct.D.par B.a discount
Which of the following is true of risk​ premium?A.The government bonds have a higher risk premium than that of corporate bonds.B.Tminus−bills have a have a higher risk premium than that of Treasury bonds.C.The speculative corporate issues have a lower risk premium than that of the higher rated corporate issues.D.The lower−rated corporate issues have a higher risk premium than that of the higher rated corporate issues. D.The lower−rated corporate issues have a higher risk premium than that of the higher rated corporate issues.
Less certain a cash​ flow, the​ ________ the​ risk, and​ ________ the present value of the cash flow. A.​higher; lowerB.​higher; higherC.​lower; higherD.​lower; lower A.​higher; lower
The​ ________ feature permits the issuer to repurchase bonds at a stated price prior to maturity.A. putB.swapC.conversionD.call D. Call
The inflation risk premium on a bond is 2​ percent, the U.S. Tminus−bill rate is 5​ percent, the maturity risk premium on the bond is 3​ percent, the default risk premium on the bond is 2​ percent, and the liquidity risk premium on the bond is 1 percent. Calculate its nominal rate of return.A.​9%B.​13%C.​11%D.​16% B. 13%
Upward −sloping yield curves result from higher future inflation​ expectations, lender preferences for shorter maturity​ loans, and greater supply of short−term as opposed to long−term loans relative to their respective demand.True or False True
What is the yield to​ maturity, to the nearest​ percent, for the following​ bond: current price is​ $908, coupon rate is 11​ percent, $1,000 par​ value, interest paid​ annually, eight years to​ maturity?A.12 percentB.11 percentC.14 percentD.13 percent D.13 percent
The value of a bond is the present value of the​ ________.dividends and maturity valueB.interest payments and maturity valueC.maturity valueD.interest and dividend payments B. interest payments and maturity value
A firm has an issue of​ $1,000 par value bonds with a 9 percent stated interest rate outstanding. The issue pays interest annually and has 20 years remaining to its maturity date. If bonds of similar risk are currently earning 11​ percent, the​ firm’s bond will sell for​ ________ today.A.​$716.67B.​$1,123.33C.​$840.73D.​$1,000 ​$840.73
7 steps in Investment Banking Process 1. Selecting the Investment Banker-competitive or negotiated2. Pre-underwriting Duties (advising)-amount, type, terms of new issue-due-diligence, best efforts-compensation and fees3. Registration with the S.E.C. (advising)-prospectus-approval – what does it mean?-shelf registration4. Forming the Syndicate (selling)-spreads the risk, wider distribution5. Pricing the Issue (advising)6. Distributing (Selling) the Issue (selling)-road show-oversubscribed or undersubscribed7. Stabilizing the Price (advising)-underwriter acts as NASDAQ dealer
Which of the following is an advantage for a firm to issue common stock over long−term ​debt?A.the primary claim of equity holders on income and assets in the event of liquidationB.the tax deductibility of dividends which lowers the cost of equity financingC.the cost of equity financing being less than the cost of debt financingD.no maturity date on which the par value of the issue must be repaid D.no maturity date on which the par value of the issue must be repaid
________ is the actual amount each common stockholder would expect to receive if a​ firm’s assets are sold for their market​ value, creditors and preferred stockholders are​ repaid, and any remaining money is divided among the common stockholdersA.Book valueB.The present value of the dividendsC.Liquidation valueD.The​ P/E multiple C.Liquidation value
If expected return is less than required return on an​ asset, rational investors will​ ________.A.sell the​ asset, which will drive the price up and cause the expected return to reach the level of the required returnB.buy the​ asset, which will drive the price up and cause expected return to reach the level of the required returnC.buy the​ asset, since price is expected to increaseD.sell the​ asset, which will drive the price down and cause the expected return to reach the level of the required return D.sell the​ asset, which will drive the price down and cause the expected return to reach the level of the required return
A group formed by an investment banker to share the financial risk associated with underwriting new securities is called​ a(n) ________.A.investment banking consortiumB.broker poolC.selling groupD.underwriting syndicate D.underwriting syndicate
Julian is considering purchasing the stock of Pepsi Cola because he really loves the taste of Pepsi. What should Julian be willing to pay for Pepsi today if it is expected to pay a​ $2 dividend in one year and he expects dividends to grow at 5 percent​ indefinitely? Julian requires a 12 percent return to make this investment.A.​$29.33B.​$28.57C.​$43.14D.​$31.43 B.​$28.57
Which of the following is an attribute of investment​ bankers?A.They bear the risk of selling a security issue.B.They provide the issuer with advice relating to the amounts of dividend to be paid.C.They act as middlemen between the issuer and the banker.D.They make longminus−term investments for banking institutions A.They bear the risk of selling a security issue.
In the Gordon​ model, the value of a common stock is the​ ________.A.actual amount each common stockholder would expect to receive if the​ firm’s assets are soldB.net value of all assets which are liquidated for their exact accounting valueC.present value of a nonminus−growing dividend streamD.present value of a constant growing dividend stream D.present value of a constant growing dividend stream
The higher an​ asset’s beta,​ ________.A.the lower the expected return will be in an up marketB.the less responsive it is to changing market returnsC.the higher the expected return will be in a down marketD.the more responsive it is to changing market returns D.the more responsive it is to changing market returns
War, inflation, and the condition of the foreign markets are all examples of​ ________.A.business specific riskB.nondiversifiable riskC.internal riskD.unsystematic risk B.nondiversifiable risk
The goal of an efficient portfolio is to​ ________.A.minimize risk for a given level of returnB.maximize risk in order to maximize profitC.achieve a predetermined rate of return for a given level of riskD.minimize profit in order to minimize risk A.minimize risk for a given level of return
Combining two assets having perfectly negatively correlated returns will result in the creation of a portfolio with an overall risk that​ ________.A.stabilizes to a level between the asset with the higher risk and the asset with the lower riskB.remains unchangedC.decreases to a level below that of either assetD.increases to a level above that of either asset C.decreases to a level below that of either asset
An increase in the beta of a​ corporation, all else being the​ same, indicates​ ________.A.an increase in​ risk, a higher required rate of​ return, and hence a lower share priceB.an increase in​ risk, a lower required rate of​ return, and hence a higher share priceC.a decrease in​ risk, a higher required rate of​ return, and hence a lower share priceD.a decrease in​ risk, a lower required rate of​ return, and hence a higher share price a
________ risk represents the portion of an​ asset’s risk that can be eliminated by combining assets with less than perfect positive correlation.A.EconomicB.DiversifiableC.SystematicD.Market b

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