FINC 341 Exam 2 Exam with complete solutions 2025.

FINC 341 Exam 2 Exam with complete
solutions 2025




In .an .amortized .loan, .the .payment .of .principal .is .largest .in .the .first .payment, .and
.decreases .with .each .payment .thereafter. .- .CORRECT .ANSWER✔✔False .- .payment .of

.principal .is .smallest .in .the .first .payment .and .increases .with .each .payment .thereafter.




If .a .firm's .earnings .per .share .grew .from .$1 .to .$1.50 .over .a .10-year .period, .the .total
.growth .would .be .50%, .and .the .annual .growth .rate .would .be .equal .to .5%. .- .CORRECT

.ANSWER✔✔False .- .The .annual .growth .rate .would .be .less .than .5% .(specifically, .4.14% .←

.solved .in .TVM)




The .nominal .rate, .the .periodic .rate, .and .the .effective .rate .can .all .be .equal .when
.compounding .is .semiannual .and .the .payments .are .made .semiannually. .- .CORRECT

.ANSWER✔✔False .- .they .will .only .all .be .equal .when .compounding .is .annual.




The .value .of .a .perpetuity .decreases .when .the .required .rate .of .return .increases. .- .CORRECT
.ANSWER✔✔True




You .would .rather .be .invested .in .an .account .that .pays .you .interest .compounded .quarterly
.than .one .that .pays .interest .compounded .monthly. .- .CORRECT .ANSWER✔✔False .-

.Compounding .more .frequently .will .always .yield .a .higher .future .value. .Therefore .you'd

.rather .have .monthly .compounding .rather .than .quarterly .if .you .are .earning .interest.

, Founders' .shares .are .stock .owned .by .the .firm's .founders .that .have .sole .voting .rights .but
.restricted .dividends .for .a .specified .number .of .years. .- .CORRECT .ANSWER✔✔True




Common .stockholders .often .have .the .preemptive .right .to .purchase .on .a .pro .rata .basis .any
.additional .shares .sold .by .the .firm. .This .enables .current .stockholders .to .maintain .control

.and .protects .current .stockholders .from .dilution .of .stock .value. .- .CORRECT

.ANSWER✔✔True




When .investing .overseas, .you .are .betting .that .foreign .stock .prices .will .increase .in .their
.local .markets, .and .that .the .currencies .in .which .you .will .be .paid .will .fall .relative .to .the

.dollar. .- .CORRECT .ANSWER✔✔False .- .everything .is .correct .except .you .are .betting

.currencies .you .will .be .paid .in .will .strengthen .relative .to .the .dollar.




According .to .the .stock .valuation .model .presented .in .the .textbook, .the .value .that .an
.investor .assigns .to .a .share .of .stock .is .independent .of .the .length .of .time .that .investor

.plans .to .hold .the .stock. .- .CORRECT .ANSWER✔✔True




Zero .coupon .bonds .provide .low .interest .income .rather .than .capital .appreciation. .-
.CORRECT .ANSWER✔✔False .- .Zero .coupon .bonds .provide .no .interest .income, .only .capital

.appreciation




If .a .bond .gets .called .(because .of .a .sinking .fund .provision) .that .has .a .coupon .rate .that .is
.less .than .the .current .interest .rate .on .similar .bonds, .the .bondholder .was .actually .hurt .by

.the .sinking .fund .provision .rather .than .protected. .- .CORRECT .ANSWER✔✔False .- .If .a .bond

.gets .called .with .a .lower .coupon .rate .than .the .current .interest .rate, .investors .will .be .able

.to .reinvest .their .money .at .the .higher .interest .rate .so .they .aren't .hurt .by .the .call

.provision, .rather .they .are .protected.




If .current .interest .rates .are .below .an .outstanding .callable .bond's .coupon .rate, .then .that
.callable .bond .is .likely .to .be .called, .and .investors .will .estimate .its .expected .rate .of .return

.as .the .yield .to .call .rather .than .as .the .yield .to .maturity. .- .CORRECT .ANSWER✔✔True