FI 302 Exam 2- Whaley Questions And
Accurate Answers
A bond is a ___ instrument by which a borrower of funds agrees to pay back the funds with
specific dates in the future. - ANSWER Long-term debt
The appropriate rate to use to discount the cash flows of a bond in order to determine the
current price is the ____. - ANSWER Yield to maturity
Trials Inc. has issued 30-year $1000 face value, 10% annual coupon bonds, with a yield to
maturity of 9.0%. The annual interest payment for the bond is ____. - ANSWER $100
The ____ is the regular interest payment of the bond. - ANSWER Coupon
The ___ is the expiration date of the bond. - ANSWER Maturity date
The _____ is the interest rate printed on the bond. - ANSWER Coupon rate
"Junk" bonds are a street name for ____ grade bonds. - ANSWER Speculative
When the ___ is less than the yield to maturity, the bond sells at a/the ___ the par value. -
ANSWER 1. Coupon rate
, 2. discount to
Zero-Coupon Bonds are - ANSWER priced at a deep discount
Stocks are different from bonds because - ANSWER stocks, unlike bonds, represent residual
ownership
Bonds are different from stocks because ________ - ANSWER bonds promise fixed payments for
the length of their maturity
You can think of the ___ as the "used stock" market because these shares have been owned or
"used" previously. - ANSWER secondary market
The ___ is the market of the first sale in which companies first sell their authorized shares to
the public. - ANSWER primary market
____ means that the percentage increase in the dividend is the same each year - ANSWER
constant growth
The holder of preferred stock is entitled to a constant dividend _____ - ANSWER every period
The value of a financial asset is the - ANSWER present value of all of the future cash flows that
will be received
Accurate Answers
A bond is a ___ instrument by which a borrower of funds agrees to pay back the funds with
specific dates in the future. - ANSWER Long-term debt
The appropriate rate to use to discount the cash flows of a bond in order to determine the
current price is the ____. - ANSWER Yield to maturity
Trials Inc. has issued 30-year $1000 face value, 10% annual coupon bonds, with a yield to
maturity of 9.0%. The annual interest payment for the bond is ____. - ANSWER $100
The ____ is the regular interest payment of the bond. - ANSWER Coupon
The ___ is the expiration date of the bond. - ANSWER Maturity date
The _____ is the interest rate printed on the bond. - ANSWER Coupon rate
"Junk" bonds are a street name for ____ grade bonds. - ANSWER Speculative
When the ___ is less than the yield to maturity, the bond sells at a/the ___ the par value. -
ANSWER 1. Coupon rate
, 2. discount to
Zero-Coupon Bonds are - ANSWER priced at a deep discount
Stocks are different from bonds because - ANSWER stocks, unlike bonds, represent residual
ownership
Bonds are different from stocks because ________ - ANSWER bonds promise fixed payments for
the length of their maturity
You can think of the ___ as the "used stock" market because these shares have been owned or
"used" previously. - ANSWER secondary market
The ___ is the market of the first sale in which companies first sell their authorized shares to
the public. - ANSWER primary market
____ means that the percentage increase in the dividend is the same each year - ANSWER
constant growth
The holder of preferred stock is entitled to a constant dividend _____ - ANSWER every period
The value of a financial asset is the - ANSWER present value of all of the future cash flows that
will be received
