FINC400 quiz 3

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FINC400

 

Week 4

 

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Question 1 of 25

4.0 Points

If the inflation premium for a bond goes up, the price of the bond

 

 

[removed] A.is unaffected.

 

[removed] B.goes down.

 

[removed] C.goes up.

 

[removed] D.need more information

 

 

Question 2 of 25

4.0 Points

The interest factor for the present value of a single amount is the inverse of the future value interest factor.

 

 

[removed] A. True

[removed] B. False

Question 3 of 25

4.0 Points

The time value of money is not a useful concept in determining the value of a bond or in capital investment decisions.

 

 

[removed] A. True

[removed] B. False

Question 4 of 25

4.0 Points

   

(point) The longer the time to maturity:

 

 

[removed] A.the greater the price increase from an increase in interest rates.

 

[removed] B.the less the price increase from an increase in interest rates.

 

[removed] C.the greater the price increase from a decrease in interest rates.

 

[removed] D.the less the price decrease from a decrease in interest rates.

 

 

Question 5 of 25

4.0 Points

(point) As the interest rate increases, the interest factor (IF) for the present value of $1 increases.

 

 

[removed] A. True

[removed] B. False

Question 6 of 25

4.0 Points

   

Financial capital does not include

 

 

[removed] A.stock.

 

[removed] B.bonds.

 

[removed] C.preferred stock.

 

[removed] D.working capital.

 
Question 7 of 25

4.0 Points

    

The growth rate for the firm's common stock is 7%. The firm’s preferred stock is paying an annual dividend of $3. What is the preferred stock price if the required rate of return is 8%?

 

 

[removed] A.$3.00

 

[removed] B.$37.50

 

[removed] C.$50.00

 

[removed] D.none of these

 
Question 8 of 25

4.0 Points

    

In paying off a mortgage loan, the amount of the periodic payment that goes toward the reduction of principal increases over the life of the mortgage.

 

 

[removed] A. True

[removed] B. False

 

Question 9 of 25

4.0 Points

The calculation of the cost of capital depends upon historical costs of funds.

 

 

[removed] A. True

[removed] B. False

Question 10 of 25

4.0 Points

   

(point) The calculation of the cost of capital depends upon historical costs of funds.

 

 

[removed] A. True

[removed] B. False

Question 11 of 25

4.0 Points

   

As the interest rate increases, the interest factor (IF) for the present value of $1 increases.

 

 

[removed] A. True

[removed] B. False

Question 12 of 25

4.0 Points

(point) An annuity may be defined as

 

 

[removed] A.a payment at a fixed interest rate.

 

[removed] B.a series of payments of unequal amount.

 

[removed] C.a series of yearly payments.

 

[removed] D.a series of consecutive payments of equal amounts.

 

Reset Selection

 

uestion 13 of 25

4.0 Points

As the time period until receipt increases, the present value of an amount at a fixed interest rate

 

 

[removed] A.decreases.

 

[removed] B.remains the same.

 

[removed] C.increases.

 

[removed] D.Not enough information to tell.

 

 

Question 14 of 25

4.0 Points

(point) Within the capital asset pricing model

 

 

[removed] A.the risk-free rate is usually higher than the return in the market.

 

[removed] B.the higher the beta the lower the required rate of return.

 

[removed] C.beta measures the volatility of an individual stock relative to a stock market index.

 

[removed] D.two of the above are true.

 
Question 15 of 25

4.0 Points

     

The risk premium is primarily concerned with business risk, financial risk, and inflation risk.

 

 

[removed] A. True

[removed] B. False

uestion 16 of 25

4.0 Points

    

When inflation rises, preferred stock prices fall.

 

 

[removed] A. True

[removed] B. False

uestion 17 of 25

4.0 Points

    

(point) If the inflation premium for a bond goes up, the price of the bond

 

 

[removed] A.is unaffected.

 

[removed] B.goes down.

 

[removed] C.goes up.

 

[removed] D.need more information.

 

 

uestion 18 of 25

4.0 Points

The cost of capital for each source of funds is dependent on current market conditions and expected rates of return.

 

 

[removed] A. True

[removed] B. False

Question 19 of 25

4.0 Points

   

(point) The time value of money is not a useful concept in determining the value of a bond or in capital investment decisions.

 

 

[removed] A. True

[removed] B. False

uestion 20 of 25

4.0 Points

   

The time value of money concept becomes less critical as the prime rate increases.

 

 

[removed] A. True

[removed] B. False

Question 21 of 25

4.0 Points

   

If a single amount were put on deposit at a given interest rate and allowed to grow, its future value could be determined by reference to the future value of $1 table.

 

 

[removed] A. True

[removed] B. False

Question 22 of 25

4.0 Points

   

The risk premium is equal to the required yield to maturity minus both the real rate of return and the inflation premium.

 

 

[removed] A. True

[removed] B. False

Question 23 of 25

4.0 Points

   

The required return by investors is important to financial managers for all of the following reasons except:

 

 

[removed] A.It influences the firm's cost of financing

 

[removed] B.It influences their stock price

 

[removed] C.It is the primary driver of their financial ratios

 

[removed] D.It helps when pricing new issues of securities

 
uestion 24 of 25

4.0 Points

    

Lewis, Schultz and Nobel Development Corp. has an after-tax cost of debt of 4.5 percent. With a tax rate of 30 percent, what is the yield on the debt?

 

 

[removed] A.4.41%

 

[removed] B.9.0%

 

[removed] C.1.89%

 

[removed] D.6.43%

 

 

 

Question 25 of 25

4.0 Points

You are to receive $12,000 at the end of 5 years. The available yield on investments is 6%. Which table would you use to determine the value of that sum today?

 

 

[removed] A.Present value of an annuity of $1

 

[removed] B.Future value of an annuity

 

[removed] C.Present value of $1

 

[removed] D.Future value of $1

 
 

 

 

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