Sample Quiz #1

Sample Quiz #1 - Finance 351: Financial Management...

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1 Finance 351: Financial Management Instructor: Shuming Liu Sample Quiz 1 1. An investor holds two bonds, one with five years until maturity and the other with 20 years until maturity. Which of the following is more likely if interest rates suddenly increase by 2%? A) The five-year bond will decrease more in price. B) The 20-year bond will decrease more in price. C) Both bonds will decrease in price similarly. D) Neither bond will decrease in price, but yields will increase. 2. A company with a return on equity of 15% and a plowback ratio of 60% would expect a constant growth rate of: A) 4% B) 9% C) 21% D) 25% 3. Which of the following is correct for a bond currently selling at a premium to par? A) Its current yield is higher than its coupon rate. B) Its current yield is lower than its coupon rate. C) Its yield to maturity is higher than its coupon rate. D) Its default risk is extremely low. 4. “Double taxation” refers to: A) all partners paying equal taxes on profits. B) corporations paying taxes on both dividends and retained earnings. C) paying taxes on profits at the corporate level and dividends at the personal level. D) the fact that marginal tax rates are doubled for corporations.
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Sample Quiz #1 - Finance 351: Financial Management...

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