fin test 3 - 1 Which of the following is a correct...

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1. Which of the following is a correct statement about default? a. Default is failure to meet any of the terms of the indenture. The value of common stock depends on the a. present value of cash flows. A common stock costs $40.50, the current dividend is $1.50, and the growth in the value of the shares and the dividend is 8 percent. What is the annual rate of return on an investment in this stock? a. 12 percent The yield to maturity on a bond is the a. interest plus price appreciation (or loss) achieved by holding the bond to maturity. A 20-year $1,000 bond has a coupon of 8 percent. What would be the price if the coupon is paid semiannually and comparable bonds yield 10 percent? a.$828 An increase in investors' required return will cause the value of a common stock to a. fall A 10-year $1,000 bond has a coupon of 9 percent. What would be the price if the coupon is paid annually and comparable bonds yield 10 percent? a. $938 Management may prefer not paying dividends in order to a. finance growth and increase the value of their shares.
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