Corp Finance Final Exam Questions And
Accurate Answers
Beta Coefficient - Solution Measures the amount of systematic risk present in a specific
risky asset, as compared to that in an average risky asset?
Current Market Price - Solution The current yield on a bond is the ratio of annual interest
to which one of the following?
Current yield on a bond - Solution Annual Interest / Current market price
Yield to Maturity - Answer Refers to a bonds rate of return that is required by the market
place
Bond Covenants - Answer Protects the lender
Decrease the interest rate sensitivity of a bond - Answer Decrease in the time to
maturity
Increase in coupon rate
An investment promises a total return of 13 percent over the next year. Bill Bernanke
believes that the total real return on this investment will be only 8.0 percent.
Required:
What does Bill believe the rate of inflation will be over the next year? - Answer
(1+R)=(1+r)(1+h)
h = [(1 + .13) / (1 + .080)] - 1
Accurate Answers
Beta Coefficient - Solution Measures the amount of systematic risk present in a specific
risky asset, as compared to that in an average risky asset?
Current Market Price - Solution The current yield on a bond is the ratio of annual interest
to which one of the following?
Current yield on a bond - Solution Annual Interest / Current market price
Yield to Maturity - Answer Refers to a bonds rate of return that is required by the market
place
Bond Covenants - Answer Protects the lender
Decrease the interest rate sensitivity of a bond - Answer Decrease in the time to
maturity
Increase in coupon rate
An investment promises a total return of 13 percent over the next year. Bill Bernanke
believes that the total real return on this investment will be only 8.0 percent.
Required:
What does Bill believe the rate of inflation will be over the next year? - Answer
(1+R)=(1+r)(1+h)
h = [(1 + .13) / (1 + .080)] - 1
