15 x11 FinMan C

15 x11 FinMan C - FinancialManagement...

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Financial Management C. VALUATION, COST OF CAPITAL AND RISKS THEORIES: Bonds Issue price 3. What will be the price of a bond in which the YTM is higher than the coupon rate? A. Below face value C. At face value B. Above face value D. Cannot be determined Yield to maturity 7. The discount rate that makes the present value of a bond's payments equal to its price is termed the: A. rate of return C. current yield B. yield to maturity D. coupon rate Callable bonds 21. Firms generally decide to call their bonds when interest rates: A. rise. B. drop. C. remain the same. D. there is no relationship between interest rates and the call provision. Sensitivity analysis 2. If a bond's value rises above its par value during its life, interest rates have: A. gone up. B. gone down. C. stayed the same D. there is no correlation with interest rates 6. What happens when a bond's expected cash flows are discounted at a rate lower than the bond's coupon rate? A. The price of the bond increases B. The coupon rate of the bond increases C. The par value of the bond decreases D. The coupon payments will be adjusted to the new discount rate Comprehensive 4. Which of the following statements is correct? A. Bond prices and interest rates move in the same direction, i.e., if interest rates rise, so will bond prices. B. The market price of a discount bond will approach the bond's par value as the maturity date approaches. Barring changes in the probability of default, the value of the bond cannot fail to increase each year as the time to maturity approaches. C. The "current yield" on a noncallable discount bond will normally exceed the bond's yield to maturity. D. The "current yield" on a noncallable discount bond will normally exceed the bond's coupon interest rate. Common stocks Price-earnings ratio 1. A high price earnings ratio usually indicates that a firm is a: A. value stock C. convertible security B. growth stock D. constant security Stock price 5. The price of a stock is: A. the future value of all expected future dividends, discounted at the dividend growth rate. B. the present value of all expected future dividends, discounted at the dividend growth rate. C. the future value of all expected future dividends, discounted at the investor’s required return. D. the present value of all expected future dividends, discounted at the investor’s required return. Dividend growth model 18. The dividend growth model, when used, assumes that the total return on a share of common stock is comprised of a: 150
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Financial Management A. capital gains yield and a dividend growth rate. B. capital gains growth rate and a dividend growth rate. C. dividend yield and the expected price next year.
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This note was uploaded on 11/22/2010 for the course CAC BSA taught by Professor Kairus during the Spring '10 term at Korea University.

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15 x11 FinMan C - FinancialManagement...

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