Chapter 6 Interest Rates and Bond Valuation
6.1 Describe interest rate fundamentals, the term structure of interest rates, and risk premiums.
1) The real rate of interest is the actual rate of interest charged by the suppliers of funds and paid
by the dem
Chapter 7 Stock Valuation
7.1 Differentiate between debt and equity.
1) Holders of equity have claims on both income and assets that are secondary to the claims of
Topic: Contrasting Debt and Equity
Question Status: Revised
Chapter 5 Time Value of Money
5.1 Discuss the role of time value in finance, the use of computational tools, and the basic
patterns of cash flow.
1) Since individuals are always confronted with opportunities to earn positive rates of return on
Chapter 9 The Cost of Capital
9.1 Understand the basic concept and the sources of capital associated with the cost of capital.
1) The target capital structure is the desired optimal mix of debt and equity financing that most
firms attempt to achieve and m
Chapter 8 Risk and Return
8.1 Understand the meaning and fundamentals of risk, return, and risk preferences.
1) For the risk-seeking manager, no change in return would be required for an increase in risk.
Topic: Fundamentals of Risk and Retu
Chapter 10 Capital Budgeting Techniques
10.1 Understand the key elements of the capital budgeting process.
1) In capital budgeting, the preferred approaches in assessing whether a project is acceptable are
those that integrate time value procedures, risk
Chapter 4 Cash Flow and Financial Planning
4.1 Understand tax depreciation procedures and the effect of depreciation on the firm's cash
1) The depreciable life of an asset can significantly affect the pattern of cash flows. The shorter