View the step-by-step solution to:

Question 12 The NYSE and NASDAQ are both A) futures markets. B) currency markets. C) secondary markets.

Question 12

The NYSE and NASDAQ are both









A) futures markets.



B) currency markets.



C) secondary markets.



D) All of the above


E) None of the above.

1 points
Question 13

If 10-year T-bonds have a yield of 6.2%, 10-year corporate bonds yield 7.4%, the maturity risk premium on all 10-year bonds is 1.3%, and corporate bonds have a 0.4% liquidity premium versus a zero liquidity premium for T-bonds, what is the default risk premium on the corporate bond?

0.67%

0.80%

0.69%

0.70%

0.66%

1 points
Question 14

Which of the following statements is CORRECT?

The NYSE does not exist as a physical location. Rather it represents a loose collection of dealers who trade stock electronically.

An example of a primary market transaction would be your uncle transferring 100 shares of Walmart stock to you as a birthday gift.

Capital market instruments include both long-term debt and common stocks.

If your uncle in New York sold 100 shares of Microsoft through his broker to an investor in Los Angeles, this would be a primary market transaction.

While the two frequently perform similar functions, investment banks generally specialize in lending money, whereas commercial banks generally help companies raise large blocks of capital from investors.

1 points
Question 15

Suppose 1-year Treasury bonds yield 4.00% while 2-year T-bonds yield 4.80%. Assuming the pure expectations theory is correct, and thus the maturity risk premium for T-bonds is zero, what is the yield on a 1-year T-bond expected to be one year from now?

5.61%

5.72%

6.22%

5.44%

6.11%

1 points
Question 16

Which of the following statements is CORRECT?

One advantage of the NPV over the IRR is that NPV takes account of cash flows over a project’s full life whereas IRR does not.

One advantage of the NPV over the IRR is that NPV assumes that cash flows will be reinvested at the WACC, whereas IRR assumes that cash flows are reinvested at the IRR. The NPV assumption is generally more appropriate.

One advantage of the NPV over the MIRR method is that NPV takes account of cash flows over a project’s full life whereas MIRR does not.

One advantage of the NPV over the MIRR method is that NPV discounts cash flows whereas the MIRR is based on undiscounted cash flows.

Since cash flows under the IRR and MIRR are both discounted at the same rate (the WACC), these two methods always rank mutually exclusive projects in the same order.

1 points
Question 17

Hindelang Inc. is considering a project that has the following cash flow and WACC data. What is the project's MIRR? Note that a project's projected MIRR can be less than the WACC (and even negative), in which case it will be rejected.

WACC:

10.50%

Year

0

1

2

3

4
Cash flows

-$850

$300

$320

$340

$360


16.80%

16.01%

15.85%

15.06%

12.05%

1 points
Question 18

The DDD Company has been presented with an investment opportunity which will yield cash flows of $30,000 per year in Years 1 through 4, $35,000 per year in Years 5 through 9, and $40,000 in Year 10. This investment will cost the firm $150,000 today, and the firm's cost of capital is 10 percent. Assume cash flows occur evenly during the year, 1/365th each day. What is the payback period for this investment?





a. 5.23 years





b. 4.86 years



c. 4.00 years



d. 6.12 years



e. 4.35 years

1 points
Question 19

Assume that the current corporate bond yield curve is upward sloping. Under this condition, then we could be sure that

Inflation is expected to decline in the future.

The economy is not in a recession.

Long-term bonds are a better buy than short-term bonds.

Maturity risk premiums could help to explain the yield curve’s upward slope.

Long-term interest rates are more volatile than short-term rates.

1 points
Question 20

The primary market is defined as the



A) market for insured securities.



B) market for new issues.



C) market for securities of the largest firms.



D) over-the-counter market.

1 points

Sign up to view the entire interaction

Recently Asked Questions

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

-

Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question