FINC 5310

FINC 5310 A bond with a face value of $1,000 that sells for $1,000 in the market is called a _____ bond. - Correct Answer-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. - Correct Answer-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: - Correct Answer-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: - Correct Answer-the risk-free rate. A stock's PE ratio is primarily affected by which three factors? - Correct Answer-risk, opportunities, accounting practices All else constant, a coupon bond that is selling at a premium, must have: - Correct Answer-a yield to maturity that is less than the coupon rate the value of a call decreases when the: - Correct Answer-exercise price increases. An increase in which one of the following will decrease the value of a call option? - Correct Answer-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. - Correct Answer-The time premiums on both your put and call are less than the time premiums on equivalent June options.