BFIN 300 midterm exam |Questios with
Correct Answers
Alan Fishman just computed the present value of a $10,000 bonus he will receive in the
future. The interest rate he used in this process is referred to as which one of the following? -
✔Discount rate
The process of determining the present value of future cash flows in order to know their
worth today is referred to as - ✔Discounted cash flow valuation
Interest earned on interest is referred to as the __________ of interest - ✔compounding
Which is the best example of a perpetuity? - ✔Pension plan with TIAA
Capital One is charging you 1.5% per month on your credit card. What is your Annual
Percentage Rate (APR)? - ✔18.0%
During the Global Financial Crisis, Interest Only financial products were a significant problem.
Which is the best example of an I/O security? - ✔Corporate bond
Which is the best definition of an annuity? - ✔A cash flow stream where a fixed amount
is received every year
A bonds coupon rate is equal to the annual interest divided by which one of the following? -
✔Face Value
The bond principal is repaid on which one of these dates? - ✔Maturity date
Protective covenants: - ✔Are primarily designed to protect bondholders.
, The items included in an indenture that can limit actions of the issuer in order to protect
bondholders interests are referred to as the: - ✔Protective covenants
What is the average life of common equity? - ✔Forever. It doesn't mature
How is the Dividend Discount Model get calculated? - ✔A model which determines the
current price of a stock as its dividend next period divided by the discount rate less the dividend
growth rate
What are the relevant cash flows for valuing a share of common stock? - ✔Dividends
Which is not a feature of common stock? - ✔Protective covenant; or Interest
What is a financial security? - ✔A claim against assets of cash flows of a company
Who is the primary regulator of the US securities markets? - ✔Securities and
Exchange Commission
The Securities and Exchange Commission does all of the following except: - ✔Regulates
all national banks in the US
Which of the following is a security traded in the US money market? - ✔Treasury Bills
What is the best definition of a derivative in the context of securities markets? - ✔A
security where the value is based on the value of another security
Correct Answers
Alan Fishman just computed the present value of a $10,000 bonus he will receive in the
future. The interest rate he used in this process is referred to as which one of the following? -
✔Discount rate
The process of determining the present value of future cash flows in order to know their
worth today is referred to as - ✔Discounted cash flow valuation
Interest earned on interest is referred to as the __________ of interest - ✔compounding
Which is the best example of a perpetuity? - ✔Pension plan with TIAA
Capital One is charging you 1.5% per month on your credit card. What is your Annual
Percentage Rate (APR)? - ✔18.0%
During the Global Financial Crisis, Interest Only financial products were a significant problem.
Which is the best example of an I/O security? - ✔Corporate bond
Which is the best definition of an annuity? - ✔A cash flow stream where a fixed amount
is received every year
A bonds coupon rate is equal to the annual interest divided by which one of the following? -
✔Face Value
The bond principal is repaid on which one of these dates? - ✔Maturity date
Protective covenants: - ✔Are primarily designed to protect bondholders.
, The items included in an indenture that can limit actions of the issuer in order to protect
bondholders interests are referred to as the: - ✔Protective covenants
What is the average life of common equity? - ✔Forever. It doesn't mature
How is the Dividend Discount Model get calculated? - ✔A model which determines the
current price of a stock as its dividend next period divided by the discount rate less the dividend
growth rate
What are the relevant cash flows for valuing a share of common stock? - ✔Dividends
Which is not a feature of common stock? - ✔Protective covenant; or Interest
What is a financial security? - ✔A claim against assets of cash flows of a company
Who is the primary regulator of the US securities markets? - ✔Securities and
Exchange Commission
The Securities and Exchange Commission does all of the following except: - ✔Regulates
all national banks in the US
Which of the following is a security traded in the US money market? - ✔Treasury Bills
What is the best definition of a derivative in the context of securities markets? - ✔A
security where the value is based on the value of another security
