FIN 6100 - SUU Haslam Test 2
Which of the following would you find in a bond's indenture?
The coupon rate
An agreement giving the bond issuer the option to repurchase the bond at a specified
price prior to maturity is the _____ provision.
Call
3 multiple choice options
Which of the following is not a component of an interest rate?
The fed funds rate
3 multiple choice options
Which of following would increase the credit spread on a bond?
A decrease in a company's bond rating
3 multiple choice options
The _____ premium is that portion of a nominal interest rate or bond yield that
represents compensation for the possibility of nonpayment by the bond issuer
default risk
3 multiple choice options
All else constant, a bond will sell at _____ when the coupon rate is _____ the yield to
maturity.
a discount; less than
3 multiple choice options
The principal amount of a bond that is repaid at the end of the term is called the:
Face Value
3 multiple choice options
The annual coupon payment divided by the market price of a bond is called the:
Current Yield
3 multiple choice options
The bonds issued by Jordache Jewelers bear a 7.5 percent coupon, payable
semiannually. The bonds mature in 13 years and have a $1,000 face value. Currently, the
, bonds sell at par. What is the yield to maturity?
7.50 percent
3 multiple choice options
Cedar City Supply has a bond issue outstanding that pays a 7.5 percent coupon and
matures in 14 years. The bonds have a par value of $1,000 and a market price of
$942.35. Interest is paid semiannually. What is the yield to maturity?
8.2%
3 multiple choice options
If the average annual rate of return for common stocks is 11.7%, and treasury bills is
4.1%, what is the average market risk premium?
7.6%
3 multiple choice options
The portion of the risk that can be eliminated by diversification is called
Firm Specific Risk
3 multiple choice options
The "beta" is a measure of:
Market risk
3 multiple choice options
Which of the following is not true regarding beta?
Will decrease as a security's returns become more correlated with the market
portfolio.
3 multiple choice options
The correlation coefficient between stock A and the market portfolio is +0.6. The
standard deviation of return of the stock is 30% and that of the market portfolio is 20%.
Calculate the beta of the stock.
.9
3 multiple choice options
Casino Inc. is expected to pay a dividend of $6 per share at the end of year one and
these dividends are expected to grow at a constant rate of 6% per year forever. If the
required rate of return on the stock is 18%, what is current value of the stock today?
$50
3 multiple choice options
Which of the following would you find in a bond's indenture?
The coupon rate
An agreement giving the bond issuer the option to repurchase the bond at a specified
price prior to maturity is the _____ provision.
Call
3 multiple choice options
Which of the following is not a component of an interest rate?
The fed funds rate
3 multiple choice options
Which of following would increase the credit spread on a bond?
A decrease in a company's bond rating
3 multiple choice options
The _____ premium is that portion of a nominal interest rate or bond yield that
represents compensation for the possibility of nonpayment by the bond issuer
default risk
3 multiple choice options
All else constant, a bond will sell at _____ when the coupon rate is _____ the yield to
maturity.
a discount; less than
3 multiple choice options
The principal amount of a bond that is repaid at the end of the term is called the:
Face Value
3 multiple choice options
The annual coupon payment divided by the market price of a bond is called the:
Current Yield
3 multiple choice options
The bonds issued by Jordache Jewelers bear a 7.5 percent coupon, payable
semiannually. The bonds mature in 13 years and have a $1,000 face value. Currently, the
, bonds sell at par. What is the yield to maturity?
7.50 percent
3 multiple choice options
Cedar City Supply has a bond issue outstanding that pays a 7.5 percent coupon and
matures in 14 years. The bonds have a par value of $1,000 and a market price of
$942.35. Interest is paid semiannually. What is the yield to maturity?
8.2%
3 multiple choice options
If the average annual rate of return for common stocks is 11.7%, and treasury bills is
4.1%, what is the average market risk premium?
7.6%
3 multiple choice options
The portion of the risk that can be eliminated by diversification is called
Firm Specific Risk
3 multiple choice options
The "beta" is a measure of:
Market risk
3 multiple choice options
Which of the following is not true regarding beta?
Will decrease as a security's returns become more correlated with the market
portfolio.
3 multiple choice options
The correlation coefficient between stock A and the market portfolio is +0.6. The
standard deviation of return of the stock is 30% and that of the market portfolio is 20%.
Calculate the beta of the stock.
.9
3 multiple choice options
Casino Inc. is expected to pay a dividend of $6 per share at the end of year one and
these dividends are expected to grow at a constant rate of 6% per year forever. If the
required rate of return on the stock is 18%, what is current value of the stock today?
$50
3 multiple choice options
