FINC 5310 Exam 2 Concepts| Exam Questions with Correct Answers| Latest Update
Guaranteed Success
A 12-year, 5 percent coupon bond pays interest annually. The bond has a face value of $1,000.
What is the percentage change in the price of this bond if the market yield rises to 6 percent
from the current level of 5.5 percent? -4.26%
A bond with a face value of $1,000 that sells for $1,000 in the market is called a _____ bond.
par value
A bond with a face value of $1,000 that sells for less than $1,000 in the market is called a _____
bond. discount
A par value bond offers a coupon rate of 7 percent with semiannual interest payments. The
effective annual rate provided by these bonds must be greater than 7 percent but less than
8 percent.
A stock with a beta of zero would be expected to have a rate of return equal to: the risk-free
rate
A stock's PE ratio is primarily affected by which three factors? risk, opportunities, accounting
practices
All else constant, a coupon bond that is selling at a premium, must have: a yield to maturity
that is less than the coupon rate
All else held constant, the value of a call decreases when the: exercise price increases
An increase in which one of the following will decrease the value of a call option? exercise
price
, Assume you own both a May 40 put and a May 40 call on ABC stock. Which one of the following
statements is correct concerning your option positions? Ignore taxes and transaction costs.
The time premiums on both your put and call are less than the time premiums on equivalent
June options.
If the correlation between two stocks is -1, the returns on the stocks: move perfectly
opposite to one another.
If the issuer of a stock receives the proceeds from a sale of that issuer's stock, then the sale:
was conducted in the primary market
In the binomial option pricing model the: percentage increase in price in each interval can
differ from the percentage decrease in price.
In the formula, P3 = Div / R - g, the dividend is for period: four
Next year's annual dividend divided by the current stock price is called the: dividend yield
The Black-Scholes option pricing model is dependent on which five parameters? stock price,
exercise price, risk-free rate, variance, and time to maturity
The _____ premium is that portion of a nominal interest rate or bond yield that represents
compensation for expected future loss in purchasing power. inflation
The _____ premium is that portion of the bond yield that represents compensation for
potential difficulties that might be encountered should the bond holder wish to sell the bond
prior to maturity. liquidity
The annual interest paid by a bond divided by the bond's face value is called the: coupon
rate
Guaranteed Success
A 12-year, 5 percent coupon bond pays interest annually. The bond has a face value of $1,000.
What is the percentage change in the price of this bond if the market yield rises to 6 percent
from the current level of 5.5 percent? -4.26%
A bond with a face value of $1,000 that sells for $1,000 in the market is called a _____ bond.
par value
A bond with a face value of $1,000 that sells for less than $1,000 in the market is called a _____
bond. discount
A par value bond offers a coupon rate of 7 percent with semiannual interest payments. The
effective annual rate provided by these bonds must be greater than 7 percent but less than
8 percent.
A stock with a beta of zero would be expected to have a rate of return equal to: the risk-free
rate
A stock's PE ratio is primarily affected by which three factors? risk, opportunities, accounting
practices
All else constant, a coupon bond that is selling at a premium, must have: a yield to maturity
that is less than the coupon rate
All else held constant, the value of a call decreases when the: exercise price increases
An increase in which one of the following will decrease the value of a call option? exercise
price
, Assume you own both a May 40 put and a May 40 call on ABC stock. Which one of the following
statements is correct concerning your option positions? Ignore taxes and transaction costs.
The time premiums on both your put and call are less than the time premiums on equivalent
June options.
If the correlation between two stocks is -1, the returns on the stocks: move perfectly
opposite to one another.
If the issuer of a stock receives the proceeds from a sale of that issuer's stock, then the sale:
was conducted in the primary market
In the binomial option pricing model the: percentage increase in price in each interval can
differ from the percentage decrease in price.
In the formula, P3 = Div / R - g, the dividend is for period: four
Next year's annual dividend divided by the current stock price is called the: dividend yield
The Black-Scholes option pricing model is dependent on which five parameters? stock price,
exercise price, risk-free rate, variance, and time to maturity
The _____ premium is that portion of a nominal interest rate or bond yield that represents
compensation for expected future loss in purchasing power. inflation
The _____ premium is that portion of the bond yield that represents compensation for
potential difficulties that might be encountered should the bond holder wish to sell the bond
prior to maturity. liquidity
The annual interest paid by a bond divided by the bond's face value is called the: coupon
rate
