FIN100-V2. PRINCIPLES OF FINANCE (FIN100-V2) > TAKE ASSESSMENT: FINAL EXAM

FIN100-V2. PRINCIPLES OF FINANCE (FIN100-V2) > TAKE ASSESSMENT: FINAL EXAM

  Question Completion Status:

  Question 1

2 points  

Save  

If the interest rate is zero:

  Question 2

2 points  

Save  

If market interest rates rise:

  Question 3

2 points  

Save  

International Cruise Lines sold an issue of 15-year $1,000 par bonds to build new ships. The bonds pay 6.85% interest, semi-annually. Today's required rate of return is 8.35%. How much should these bonds sell for today? Round off to the nearest $1.

  Question 4

2 points  

Save  

The present value of an annuity due is less than the present value of an otherwise identical ordinary annuity.

  Question 5

2 points  

Save  

If market interest rates decline:

  Question 6

2 points  

Save  

The value of a bond investment, which provides fixed interest payments, will increase when discounted at a 12% rate rather than at a 7% rate.

  Question 7

2 points  

Save  

The slope of the characteristic line of a security is that security's Beta.

  Question 8

2 points  

Save  

Sibling Incorporated has a beta of 1.0. If the expected return on the market is 14%, what is the expected return on Sibling Incorporated's stock?

  Question 9

2 points  

Save  

iSaga, whose common stock is currently selling for $12 per share, is expected to pay a $1.80 dividend, and sell for $14.40 one year from now. What are the dividend yield, growth rate, and total rate of return, respectively?

  Question 10

2 points  

Save  

If you put $900 in a savings account that yields 10% compounded semiannually, how much money will you have in the account in three years (round to nearest dollar)?

  Question 11

2 points  

Save  

How much would you be willing to pay for a 10-year ordinary annuity if the payments are $500 per year and the rate of return is 6.25% annually?

  Question 12

2 points  

Save  

You are an investor and you want to achieve the highest possible return on your money. Which would be best for you to do, everything else equal?

  Question 13

2 points  

Save  

Many preferred stocks have a feature that requires a firm to periodically set aside an amount of money for the retirement of its preferred stock. What is the name of this feature?

  Question 14

2 points  

Save  

The minimum rate of return necessary to attract an investor to purchase or hold a security is referred to as the:

  Question 15

2 points  

Save  

In estimating a security's Beta, the market portfolio is commonly represented by the S&P 500 index.

  Question 16

2 points  

Save  

Which of the following is true regarding common stock?

  Question 17

2 points  

Save  

The less risky the bond (or the higher the bond rating) the lower the yield to maturity on the bond, all other things being equal.

  Question 18

2 points  

Save  

If a bond has a Standard & Poor's rating of BB, or below, it is referred to as a _________.

  Question 19

2 points  

Save  

Genny, Inc. bonds have a 9% coupon rate with semi-annual coupon payments. They have 9 1/2 years to maturity and a par value of $1,000. Compute the value of Genny's bonds if investors' required rate of return is 7%.

  Question 20

2 points  

Save  

A security that plots above the security market line is overpriced.

  Question 21

2 points  

Save  

Tri State Pickle Company preferred stock pays a perpetual annual dividend of 2 1/2% of its $100 par value. If investors' required rate of return on this stock is 15%, what is the value per share?

  Question 22

2 points  

Save  

The return on the market portfolio is currently 13%. Battmobile Corporation stockholders require a rate of return of 21% and the stock has a beta of 3.5. According to CAPM, determine the riskfree rate.

  Question 23

2 points  

Save  

For a given stated interest rate, an investor would receive a greater future value with daily compounding as opposed to monthly compounding.

  Question 24

2 points  

Save  

Which of the following is an acceptable method of measuring the risk of a single investment?

  Question 25

2 points  

Save  

Cabell Corp. bonds pay an annual coupon rate of 10%. If investors' required rate of return is now 8% on these bonds, they will be priced at:

  Question 26

2 points  

Save  

The present value of a perpetuity is finite, as opposed to infinite, because the amount of each payment declines as the time increases.

  Question 27

2 points  

Save  

Preferred stock has priority over common stock with respect to its claims on income for dividends.

  Question 28

2 points  

Save  

The future value of an annuity due is greater than the future value of an otherwise identical ordinary annuity.

  Question 29

2 points  

Save  

The sum of the present values of an investment's expected future cash flows is known as the investment's intrinsic value.

  Question 30

2 points  

Save  

Assume that WhirledCom has an issue of 15-year $1,000 par value bonds that pay 6% interest, semiannually. Further assume that today's required rate of return on these bonds is 9%. How much would these bonds sell for today? Round off to the nearest $1.

  Question 31

2 points  

Save  

Many preferred stocks have a provision that entitles a company to repurchase its preferred stock from their holders at stated prices over a given time period. What is the name of this provision?

  Question 32

2 points  

Save  

When repaying an amortized loan, the interest payments increase over time due to the compounding process.

  Question 33

2 points  

Save  

Common stock represents ownership of the firm.

  Question 34

2 points  

Save  

To evaluate or compare investment proposals, we must adjust the value of all cash flows to a common date.

  Question 35

2 points  

Save  

Assume that you have $165,000 invested in a stock whose beta is 1.25, $85,000 invested in a stock whose beta is 2.35, and $235,000 invested in a stock whose beta is 1.11. What is the beta of your portfolio?

  Question 36

2 points  

Save  

Cary's Company bonds have a 12% coupon rate. Interest is paid semi-annually. The bonds have a par value of $1,000 and will mature 8 years from now. Compute the value of  the bonds if investors' required rate of return is 8%.

  Question 37

2 points  

Save  

Thirty-five years ago you invested $1,000 in a retirement fund. Today the fund is worth $130,000. What has been your annually compounded rate of return on this investment?

  Question 38

2 points  

Save  

The PDQ Company's common stock is expected to pay a $1.00 dividend in the coming year. If investors require a 15% return and the growth rate in dividends is expected to be 5%, what will the market price of the stock be?

  Question 39

2 points  

Save  

Most preferred stocks have a feature that requires all past unpaid preferred dividend payments be paid before any common stock dividends can be paid. What is the name of this feature?

  Question 40

2 points  

Save  

The formula for calculating the present value (PV) of a perpetuity is PV = PP/(1 + i), where PP is the perpetuity payment and i is the discount rate.

  Question 41

2 points  

Save  

When the intrinsic value of an asset exceeds the market value:

  Question 42

2 points  

Save  

If we invest money for 10 years at 8 percent interest, compounded semi-annually, we are really investing money for 20 six-month periods, and receiving 4 percent interest each period.

  Question 43

2 points  

Save  

A bond indenture:

  Question 44

2 points  

Save  

The slope of the security market line is Beta.

  Question 45

2 points  

Save  

All other things being equal, the future value of an investment will increase if:

  Question 46

2 points  

Save  

You purchased 1,000 shares of Oliver Inc. common stock one year ago for $50 per share. You decided to take your profit today by selling at $55.00 per share. What is your holding period return?

  Question 47

2 points  

Save  

Which of the following has a beta of one?

  Question 48

2 points  

Save  

Which of the following is NOT a definition of yield to maturity:

  Question 49

2 points  

Save  

What is diversifying among different kinds of assets known as?

  Question 50

2 points  

Save  

OatEaters Corporation bonds are currently priced at $953.77. They have a par value of $1,000 and 6 years to maturity. They pay an annual coupon rate of 7%. What is the yield to maturity on this bond?