Question 1 2.5 / 2.5 points
Moody's has developed a corporate bond default-risk rating system using capital and lowercase letters and numbers. Below are several examples of Moody's ratings. Which answer choice lists a collection of ratings for "high credit investment grade" bonds?
Question 2 2.5 / 2.5 points
A bond is a __________ instrument by which a borrower of funds agrees to pay back the funds with interest on specific dates in the future.
Question 3 2.5 / 2.5 points
When a company is in financial difficulty and cannot fully pay all of its creditors, the first lenders to be paid are the:
Question 4 2.5 / 2.5 points
The __________ is the regular interest payment of the bond.
Question 5 2.5 / 2.5 points
As the rating of a bond increases (for example, from A, to AA, to AAA), it generally means that:
Question 6 2.5 / 2.5 points
The __________ is the interest rate printed on the bond.
Question 7 2.5 / 2.5 points
The difference between the price and the par value of a zero-coupon bond represents:
Question 8 2.5 / 2.5 points
Bonds are sometimes called __________ securities because they pay set amounts on specific future dates.
Question 9 2.5 / 2.5 points
From 1980 to 2006, the default risk premium differential between Aaa-rated bonds and Aa-rated bonds has averaged between:
Question 10 2.5 / 2.5 points
"Junk" bonds are a street name for __________ grade bonds.
Question 11 2.5 / 2.5 points
When the __________ is less than the yield to maturity, the bond sells at a/the __________ the par value.
Question 12 2.5 / 2.5 points
Delagold Corporation is issuing a zero-coupon bond that will have a maturity of 50 years. The bond's par value is $1,000, and the current yield on similar bonds is 7.5%. What is the expected price of this bond, using the semiannual convention?
Question 13 2.5 / 2.5 points
When real property is used as collateral for a bond, it is termed a/an:
Question 14 2.5 / 2.5 points
Zero-coupon U.S. Government bonds are known as:
Question 15 2.5 / 2.5 points
With a bearer bond, whoever held it was entitled to the __________ and the __________.
Question 16 2.5 / 2.5 points
Espresso Petroleum Inc. has a contractual option to buy back, prior to maturity, bonds the firm issued five years ago. This is an example of what type of bond?
Question 17 2.5 / 2.5 points
Which of the following is NOT an example of a bond that contains an option feature?
Question 18 2.5 / 2.5 points
The __________ is the expiration date of the bond.
Question 19 2.5 / 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 20 2.5 / 2.5 points
Which of the following statements about the relationship between yield to maturity and bond prices is false?
Question 21 2.5 / 2.5 points
The __________ is the market of first sale in which companies first sell
Question 22 2.5 / 2.5 points
Which of the statements below is true?
The profits for common stock owners come after payment to the employees, suppliers, government, and creditors.
Shareholders elect the board of directors, which ultimately selects the bondholder team that runs the day-to-day operations of the company.
Stock is a minor financing source for public companies.
Stockholders are paid before debtholders (bondholders) if a company fails.
Question 23 2.5 / 2.5 points
__________ means that the percentage increase in the dividend is the same each year.
Question 24 2.5 / 2.5 points
Which of the statements below is true?
A problem with using the dividend growth model is that it appears to underestimate the expected return for all stocks.
A problem with using the dividend growth model is that it produces a negative expected return whenever a firm cuts dividends.
A problem with using the dividend growth model is that it produces a positive expected return whenever a firm cuts dividends.
A problem with using the dividend growth model is that it produces a negative expected return whenever a firm increases its dividends.
Question 25 2.5 / 2.5 points
If we know the dividend stream, the future price of the stock, the future selling date of the stock, and the required return, we can price stocks just as we priced:
Question 26 2.5 / 2.5 points
Which of the statements below is FALSE? Answer:
The dividend model requires that a firm have a cash dividend history and that the dividend history shows a constant dividend or a positive growth in dividends.
A problem with using the dividend growth model is that it appears to underestimate the expected return for some stocks.
A problem with using the dividend growth model is that it produces a negative expected return whenever a firm cuts its dividends.
A problem with using the dividend growth model is that it appears to underestimate the expected return for all stocks.
Question 27 2.5 / 2.5 points
You can think of the __________ as the "used stock" market because these shares have been owned or "used" previously.
Question 28 2.5 / 2.5 points
The hiring process for an investment banker can happen in two ways. Which of the below is one of these ways?
Question 29 2.5 / 2.5 points
Strong-form efficient markets theory proclaims that:
Question 30 2.5 / 2.5 points
You buy a stock for which you expect to receive an annual dividend of $2.10 for the 15 years that you plan on holding it. After 15 years, you expect to sell the stock for 32.25. What is the present value of a share for this company if you want a 10% return?
Question 31 2.5 / 2.5 points
You want to invest in a stock that pays $6 annual cash dividends for the next five years. At the end of the five years, you will sell the stock for $30. If you want to earn 10% on this investment, what is a fair price for this stock if you buy it today?
Question 32 2.5 / 2.5 points
A typical practice of many companies is to distribute part of the earnings to shareholders through:
Question 33 2.5 / 2.5 points
Shortcomings of the dividend pricing models suggest that we need a pricing model that is more inclusive than the dividend models and provides expected returns for companies based on aspects besides their historical dividend patterns. Which of the below is NOT one of these aspects?
Question 34 0 / 2.5 points
__________ has to do with the speed and accuracy of processing a buy or sell order at the best available price.
Question 35 2.5 / 2.5 points
Which of the statements below is FALSE?
In estimating the current price using the constant growth dividend model, we let g be the growth rate on the dividend stream and r be the rate of return required by the potential buyer of the stock.
Constant growth means that the percentage increase in the dividend is the same each year.
Div0 refers to the dividends that were just been paid to the current owner of the stock.
One unlikely dividend pattern is to raise or grow dividends by a fixed amount at fixed intervals.
Question 36 2.5 / 2.5 points
In the United States, there are three well-known secondary stock markets. Which of the below is NOT one of these?
Question 37 2.5 / 2.5 points
Stocks are different from bonds because:
Question 38 2.5 / 2.5 points
Which of the statements below is FALSE?
The profits for common stock owners come before payment to employees, suppliers, government, and creditors.
Shareholders elect the board of directors, which ultimately selects the management team that runs the day-to-day operations of the company.
Stock is a major financing source for public companies.
Common stock's ownership claim on the assets and cash flow of a company is often referred to as a residual claim.
Question 39 0 / 2.5 points
Which of the statements below is true?
Buying of shares is the selling of ownership in the company.
A company is said to go "private" when it opens up its ownership structure to the general public through the sale of common stock.
Private companies choose to sell stock to attract permanent financing through equity ownership of the company.
Most companies have the resident expertise to complete an initial public offering (IPO), or first public equity issue.
Question 40 2.5 / 2.5 points
Which of the statements below is FALSE?
