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3010 practice exam2.F03.wpracprobs - CORPORATE FINANCE...

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CORPORATE FINANCE PRACTICE EXAM 2 Name: Section Time:f3 Multiple Choice 1. Which of the following events would make it more likely that a company would choose to call its outstanding callable bonds? a. A reduction in market interest rates. b. The company's bonds are downgraded. c. An increase in the call premium. d. Answers a and b are correct. e. Answers a, b, and c are correct. 2. All of the following may serve to reduce the coupon rate that would otherwise be required on a bond issued at par, except a 3. Which of the following about sinking funds is most correct? 4. A 10-year bond has a 10 percent annual coupon and a yield to maturity of 12 percent. The bond can be called in 5 years at a call price of $1,050 and the bond’s face value is $1,000. Which of the following statements is most correct? 1
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5. If the expected rate of return on a stock exceeds the required rate, a. The stock is experiencing supernormal growth. b. The stock should be sold. c. The company is probably not trying to maximize price per share. d. The stock is a good buy. e. Dividends are not being declared.
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