AGEC 4040 TEST 2 EXAM QUESTIONS
WITH 100% CORRECT ANSWERS |
LATEST VERSION 2025/2026.
The rate of interest agreed upon contractually charged by a lender or promised by a borrower
is the ______ interest rate.________ rate of interest is the actual rate charged by the supplier
and paid by the demander of funds. - ANS nominal
_____ yield curve reflects higher expected future rates of interest. - ANS An upward-sloping
(nominal yield curve)
Generally, an increase in risk will result in ____ required return or interest rate. - ANS A
higher
The _____ rate of interest is typically the required rate of return on a three-month U.S.
Treasury bill. - ANS risk-free
A yield curve that reflects relatively similar borrowing costs for both short-term and long-term
loans is called - ANS flat yield curve
The cost of long-term debt generally _____ that of short-term debt. - ANS is greater than
If a bond pays $1,000 plus interest at maturity, $1,000 is called the - ANS par value
1 | Page @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
, ______ is secured by real estate. - ANS A mortgage bond
The process that links risk and return in order to determine the worth of an asset is termed -
ANS valuation
Bonds are - ANS long-term debt instruments
The key inputs to the valuation process include - ANS cash flow, cash flow timing, and risk
The market price of outstanding issues varies from par because - ANS the market rate of
interest has changed
If the required return is greater than the coupon rate, a bond will sell at - ANS a discount
_____ are promised a fixed periodic dividend that must be paid prior to paying any common
stock dividends. - ANS preferred stockholders
The cost of preferred stock is - ANS higher than the cost of long term debt and lower than
the cost of common stock
Shares of stock currently owned by the firm's shareholders are called - ANS outstanding
Common stockholders expect to earn a return by receiving - ANS dividends
The attempt by a non-management group to gain control of the management of a firm by
soliciting a sufficient number of proxy voters is called - ANS proxy battle
The investment banker does all of the following EXCEPT - ANS making long-term investments
for banking institutions
2 | Page @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
WITH 100% CORRECT ANSWERS |
LATEST VERSION 2025/2026.
The rate of interest agreed upon contractually charged by a lender or promised by a borrower
is the ______ interest rate.________ rate of interest is the actual rate charged by the supplier
and paid by the demander of funds. - ANS nominal
_____ yield curve reflects higher expected future rates of interest. - ANS An upward-sloping
(nominal yield curve)
Generally, an increase in risk will result in ____ required return or interest rate. - ANS A
higher
The _____ rate of interest is typically the required rate of return on a three-month U.S.
Treasury bill. - ANS risk-free
A yield curve that reflects relatively similar borrowing costs for both short-term and long-term
loans is called - ANS flat yield curve
The cost of long-term debt generally _____ that of short-term debt. - ANS is greater than
If a bond pays $1,000 plus interest at maturity, $1,000 is called the - ANS par value
1 | Page @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
, ______ is secured by real estate. - ANS A mortgage bond
The process that links risk and return in order to determine the worth of an asset is termed -
ANS valuation
Bonds are - ANS long-term debt instruments
The key inputs to the valuation process include - ANS cash flow, cash flow timing, and risk
The market price of outstanding issues varies from par because - ANS the market rate of
interest has changed
If the required return is greater than the coupon rate, a bond will sell at - ANS a discount
_____ are promised a fixed periodic dividend that must be paid prior to paying any common
stock dividends. - ANS preferred stockholders
The cost of preferred stock is - ANS higher than the cost of long term debt and lower than
the cost of common stock
Shares of stock currently owned by the firm's shareholders are called - ANS outstanding
Common stockholders expect to earn a return by receiving - ANS dividends
The attempt by a non-management group to gain control of the management of a firm by
soliciting a sufficient number of proxy voters is called - ANS proxy battle
The investment banker does all of the following EXCEPT - ANS making long-term investments
for banking institutions
2 | Page @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
