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Version A(3) - Answer Key FIN 256 FALL 2011 EXAM #2 SECTION...

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Page 1 Answer Key FALL 2011 EXAM #2 You can use pen or pencil to darken in the circle on the scan-tron form corresponding to the correct answer to each question. If you make a mistake, erase or cross out your answer completely, then darken in the correct circle. SECTION M001 VERSION A This Exam consists of 22 questions on 12 pages. You are responsible to ensure that all pages are attached to your exam. All multiple choice questions should be answered on the scan-tron form. In regards to multiple choice questions, only the scan-tron will be graded. Answers written on the exam question sheet will not be graded. FIN 256 A
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Name: Page 2 EXAM #2 Multiple Choice questions are worth 2 points each for a total of 30 points. 1.) Assume that a bond has been owned by four different investors during its 20-year history. Which of the following is not likely to have been shared by these different owners? A.) Coupon rate B.) Cash flows C.) Par value D.) Yield to maturity E.) Face value 2.) When new information becomes available in the market, evidence suggests that: A.) insiders will be the only investors to gain. B.) it takes at least ten trading-days for stock prices to adjust. C.) abnormal gains can still be made even if you do not currently own the stock. D.) transaction costs will erase any benefit of trading on the information. E.) stock prices will adjust to the information rapidly. 3.) Which of the following is correct when a bond investor's rate of return for a particular period equals the bond's coupon rate? A.) The bond increased in price during the period. B.) The bond decreased in price during the period. C.) The coupon payment increased during the period. D.) The bond price remained unchanged during the period. E.) The coupon payment decreased during the period. 4.) When valuing stock with the dividend discount model, the present value of future dividends will: A.) remain constant regardless of the time horizon selected. B.) change depending upon the time horizon selected. C.) remain constant regardless of growth rate. D.) always equal the present value of the terminal price. E.) Both A & C. A
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Name: Page 3 EXAM #2 5.) How many IRRs are possible for the following set of cash flows? CF 0 CF1 CF2 CF3 CF4 A.) 0 B.) 1 C.) 2 D.) 3 E.) 4 6.) If held until maturity, capital losses will automatically be the case for bond investors who buy: A.) discount bonds.
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This note was uploaded on 03/28/2012 for the course FIN 256 taught by Professor Wagner during the Spring '08 term at Syracuse.

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Version A(3) - Answer Key FIN 256 FALL 2011 EXAM #2 SECTION...

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