COB 300 Finance- Final Exam questions with 100% correct answers

COB 300 Finance- Final Exam

Preemptive right - correct answer ✔✔a provision in the corporate charter or bylaws that gives common
stockholders the right to purchase on a pro rata basis new issues of common stock



Market Price - correct answer ✔✔the price at which a stock sells in the market



Growth Rate - correct answer ✔✔the expected rate of growth in dividends per share



Required Rate of Return - correct answer ✔✔the minimum rate of return on a common stock that a
stockholder considers acceptable



Expected Rate of Return - correct answer ✔✔the rate of return on a common stock that a stockholder
expects to receive in the future



Dividend Yield - correct answer ✔✔the expected dividend divided by the current price of a share of
stock



Horizon Date - correct answer ✔✔the date when the growth rate becomes constant



Horizon Value - correct answer ✔✔the value at the horizon date of all dividends expected thereafter



Bond - correct answer ✔✔a long-term debt instrument



Treasury Bonds - correct answer ✔✔bonds issued by the federal government, sometimes referred to as
government bonds



Corporate Bonds - correct answer ✔✔bonds issued by corporations

, Municipal Bonds - correct answer ✔✔bonds issued by state and local governments



Par Value - correct answer ✔✔the face value of a bond



Coupon Payment - correct answer ✔✔the specified number of dollars of interest paid each year



Coupon Interest Rate - correct answer ✔✔the stated annual interest rate on a bond



Call Provision - correct answer ✔✔a provision in a bond contract that gives the issuer the right to
redeem the bonds under specified terms prior to the normal maturity date



Sinking Fund Provision - correct answer ✔✔a provision in a bond contract that requires the issuer to
retire a portion of the bond issue each year



Discount Bond - correct answer ✔✔a bond that sells below its par value



Premium Bond - correct answer ✔✔a bond that sells above its par value



Yield to Maturity - correct answer ✔✔the rate of return earned on a bond if it is held to maturity



Yield to Call - correct answer ✔✔the rate of return earned on a bond when it is called before its maturity



Target Capital Structure - correct answer ✔✔the mix of debt, preferred stock, and common equity the
firm plans to raise to fund its future projects



Capital Components - correct answer ✔✔one of the types of capital used by firms to raise funds



WACC - correct answer ✔✔a weighted average of the component costs of debt, preferred stock and
common equity