Question 1 of 40 2.5 Points
Your firm has issued 10-year, zero-coupon bonds with a $1,000 face value. If the bonds are currently selling for $514.87, what is the yield to maturity?
Question 2 of 40 2.5 Points
Which of the following statements is TRUE?
Question 3 of 40 2.5 Points
The four steps to determining the price of a bond are: __________.
Question 4 of 40 2.5 Points
The correlation coefficient, a measurement of the comovement between two variables, has what range?
Question 5 of 40 2.5 Points
The practice of not putting all of your eggs in one basket is an illustration of ___________.
Question 6 of 40 2.5 Points
Stocks differ from bonds because __________ .
Question 7 of 40 2.5 Points
MicroMedia Inc. $1,000 par value bonds are selling for $1,265. Which of the following statements is TRUE?
Question 8 of 40 2.5 Points
Stocks are different from bonds because __________.
Question 9 of 40 2.5 Points
Ten years ago, Bacon Signs Inc. issued 25-year, 8% annual coupon bonds with a $1,000 face value each. Since then, interest rates in general have fallen and the yield to maturity on the Bacon bonds is now 7%. Given this information, what is the price today for a Bacon Signs, Inc. bond?
Question 10 of 40 2.5 Points
The ___________ is the yield an individual would receive if the individual purchased the bond today and held the bond to the end of its life.
Question 11 of 40 2.5 Points
Preferred stock __________.
Question 12 of 40 2.5 Points
__________ may be defined as a measure of uncertainty in a set of potential outcomes for an event in which there is a chance for some loss.
Question 13 of 40 2.5 Points
Which of the following statements about the relationship between yield to maturity and bond prices is FALSE?
Question 14 of 40 2.5 Points
Which of the following investments is considered to be default risk-free?
Question 15 of 40 2.5 Points
A more risky stock has a higher __________.
Question 16 of 40 2.5 Points
Diversification is __________ .
Question 17 of 40 2.5 Points
Which of the choices below is FALSE?
Question 18 of 40 2.5 Points
When the __________ is less than the yield to maturity, the bond sells at a/the __________ par value.
Question 19 of 40 2.5 Points
Which of the statements below is FALSE?
A. It is common for companies to issue preferred stock with the right to convert to common shares after a specific waiting period.
B. Preferred stock does not have a maturity date.
C. Preferred stock cannot be converted into common stock.
D. Preferred shareholders' dividend claims take precedence over common shareholders' dividend claims.
Question 20 of 40 2.5 Points
The __________ is the annual coupon payment divided by the current price of the bond, and is not always an accurate indicator.
Question 21 of 40 2.5 Points
The initial outlay or cost is $1,000,000 for a four-year project. The respective future cash inflows for years one, two, three and four are: $500,000, $300,000, $300,000, and $300,000. What is the payback period without discounting cash flows?
Question 22 of 40 2.5 Points
Without a computer and special calculator, __________.
Question 23 of 40 2.5 Points
__________ cash flow is the increase in cash generated by a new project above the current cash flow without the new project.
Question 24 of 40 2.5 Points
Berra, Inc. is currently considering an eight-year project that has an initial outlay or cost of $120,000. The future cash inflows from its project for years one through eight are the same at $30,000. Berra has a discount rate of 11%. Because of capital rationing (shortage of funds for financing), Berra wants to compute the profitability index (PI) for each project. What is the PI for Berra's current project?
Question 25 of 40 2.5 Points
Which of the statements below describes the IRR decision criterion?
Question 26 of 40 2.5 Points
In terms of revenues and costs for a project, which of the statements below is FALSE?
Question 27 of 40 2.5 Points
There are two ways to correct for projects with unequal lives when using the NPV approach. Which of the answers below is one of these ways?
Question 28 of 40 2.5 Points
The __________ method of capital budgeting is a ratio of the present value of cash inflows divided by the initial investment.
Question 29 of 40 2.5 Points
The net present value of an investment is __________ .
Question 30 of 40 2.5 Points
Consider the following 10-year project. The initial after-tax outlay or after-tax cost is $1,000,000. The future after-tax cash inflows each year for years one through 10 are $200,000 per year. What is the payback period without discounting cash flows?
Question 31 of 40 2.5 Points
Which of the following in NOT a potential problem suffered by the IRR method of capital budgeting?
Question 32 of 40 2.5 Points
Which of the statements below is FALSE?
A. We calculate the equivalent annual annuity by taking the NPV of the project and find the annuity stream that equates to the NPV, using the appropriate discount rate for the project and life of the project.
B. In dealing with mutually exclusive projects of unequal lives, we can compute the EAA for the NPV of the project over the life of the project.
C. One of the advantages of NPV over other decision models is that we can select the appropriate discount rate for each individual project and still compare the resulting NPVs across different projects.
D. By using the EAA approach for mutually exclusive projects, we overcome all potential problems.
Question 33 of 40 2.5 Points
The initial outlay or cost for a four-year project is $1,000,000. The respective cash inflows for years one, two, three and four are: $500,000, $300,000, $300,000 and $300,000. What is the discounted payback period if the discount rate is 10%?
Question 34 of 40 2.5 Points
In the NPV Model, all cash flows are stated __________ .
Question 35 of 40 2.5 Points
Managers typically look at the initial outlay for the project as its capital expenditure and determine __________ from this capital expenditure.
Question 36 of 40 2.5 Points
The most popular alternative to NPV for capital budgeting decisions is the __________ method.
Question 37 of 40 2.5 Points
__________is at the heart of corporate finance because it is concerned with making the best choices about project selection.
Question 38 of 40 2.5 Points
The __________ model is usually considered the best of the capital budgeting decision-making models.
Question 39 of 40 2.5 Points
__________ corrects for most, but not all, of the problems of IRR and gives the solution in terms of a return.
Question 40 of 40 2.5 Points
Consider the following four-year project. The initial after-tax outlay or after-tax cost is $1,000,000. The future after-tax cash inflows for years one, two, three and four are: $400,000, $300,000, $200,000 and $200,000, respectively. What is the payback period without discounting cash flows?
Possibly these answers are incorrect: Question 1 and 9.
Answer will be sent by email as attachment.
