Fin qs

20. When a corporation wants to raise funds by issuing new stocks or bonds, it generally uses the services of

a.an investment banker.

b.a commercial lender.

c.the Securities and Exchange Commission (SEC).

d.the New York Stock Exchange (NYSE).

e.None of the above.

24. If the yield curve is downward sloping, what is the yield to maturity on a 10-year Treasury coupon bond, relative to that on a 1-year T-bond?

a.The yield on the 10-year bond is less than the yield on a 1-year bond.

b.The yield on a 10-year bond will always be higher than the yield on a 1-year bond because of maturity premiums.

c.It is impossible to tell without knowing the coupon rates of the bonds.

d.The yields on the two bonds are equal.

e.It is impossible to tell without knowing the relative risks of the two bonds.

25. Assume that the current yield curve is upward sloping, or normal. This implies that

a.Short-term interest rates are more volatile than long-term rates.

b.Inflation is expected to subside in the future.

c.The economy is at the peak of a business cycle.

d.Long-term bonds are a better buy than short-term bonds.

e.None of the above statements is necessarily implied by the yield curve given.

26. Which of the following are generally considered advantages of term loans over publicly issued bonds?

a.Lower flotation costs.

b.Speed, or how long it takes to bring the issue to market.

c.Flexibility, or the ability to adjust the bond's terms after it has been issued.

d.All of the above.

e.Only answers b and c above.

27. Which of the following types of debt are backed by some form of specific property?

a.Debenture.

b.Mortgage bond.

c.Subordinated debt.

d.All of the above.

e.None of the above.

28. In international markets, excluding stocks sold in the United States, what is any stock that is traded in a country other than the issuing company’s home country called?

a. ADRs

b.Yankee stock

c.Euro stock

d.Class A stock

e.Preferred stock

29. A firm expects to pay dividends at the end of each of the next four years of $2.00, $1.50, $2.50, and $3.50. If growth is then expected to level off at 8 percent, and if you require a 14 percent rate of return, how much should you be willing to pay for this stock?

a.$67.81

b.$22.49

c.$58.15

d.$31.00

e.$43.97

30. Choose the correct answer for the following: (1) Which is the best measure of risk for choosing an asset which is to be held in isolation? (2) Which is the best measure for choosing an asset to be held as part of a diversified portfolio?

a.Variance; correlation coefficient.

b.Standard deviation; correlation coefficient.

c.Beta; variance.

d.Coefficient of variation; beta.

e.Beta; beta.