1) The future value of? $200 received today and deposited at
8 percent for three years is? ________.
A.?$248
B. $200
C.?$158
D.?$252
2) The riskiness of publicly traded bond issues is rated by
independent agencies. According to? Moody’s rating? system, an Aaa bond and a
Caa bond are? ________ and? ________ respectively.
A. ?speculative; investment grade
B. prime? quality; medium grade
C. medium? grade; lowest grade
D. prime? quality; speculative
?3) A(n) ________ is a paid? individual, corporation, or a
commercial bank trust department that acts as a third party to a bond
indenture.
A. bond rating agency
B. bond issuer
C. investment banker
D. trustee
4) The future value of an ordinary annuity of? $2,000 each
year for 10? years, deposited at 12? percent, is? ________.
A. ?$11,300
B. ?$20,000
C. ?$39,310
D. ?$35,098
5) What is the approximate yield to maturity for a? $1,000
par value bond selling for? $1,120 that matures in 6 years and pays 12 percent
interest? annually?
A. 12.0 percent
B. 9.3 percent
C.13.2 percent
D.8.5 percent
6) The future value of an annuity of? $1,000 each quarter
for 10? years, deposited at 12 percent compounded quarterly is? ________.
A.?$11,200
B.?$17,549
C. ?$75,401
D.?$93,049
?7) ________ means that subsequent creditors agree to wait
until all claims of the are senior debt satisfied before having their claims
satisfied.
A. Security interest
B. Bond indenture
C. Subordination
D. Sinking fund requirement
8) The return expected from an asset is fully defined by
its? ________.
A. discount rate
B. cash flow and timing
C. risk and cash flow
D. beta
9)The present value of a? $25,000 perpetuity at a 14 percent
discount rate is? ________.
A. ?$285,000
B. ?$219,298
C. ?$178,571
D. ?$350,000
10) Review Question? 6-12 and? 6-13(LO6-6) Why is it
important for financial managers to understand the valuation? process? What are
the
three key inputs to the valuation? process?
11) The rate of return earned on an investment of? $50,000
today that guarantees an annuity of? $10,489 for six years is approximately?
________.
A.?12%
B.?5%
C.?7%
D.?10%
12) ?$1,200 is received at the beginning of year? 1, $2,200
is received at the beginning of year? 2, and? $3,300 is received at the
beginning of year 3. If these cash flows are deposited at 12? percent, their
combined future value at the end of year 3 is? ________.
A. ?$ 6,700
B. ?$12,510
C. ?$ 8,142
D. ?$17,072
13) The term structure of interest rates is the relationship
between? ________.
A. the maturity and rate of return for bonds with similar
level of risk
B. the general expectation of inflation and nominal rate of
return for bonds
C. the present value of principal and coupon rate of the
bonds
D. the general expectation of inflation and real rate of return
for bonds
14) The price of a bond with a fixed coupon rate and the
required return have a relationship that is best described as? ________.
A. direct
B. inverse
C. constant
D. perfect positive correlation
15) The present value of? $100 received at the end of year?
1, $200 received at the end of year? 2, and? $300 received at the end of year?
3, assuming an opportunity cost of 13? percent, is? ________.
A. ?$ 453
B.?$ 416
C.?$1,181
D.?$ 500
16) If a United States Savings bond can be purchased for? $14.60
and has a maturity value at the end of 25 years of? $100, what is the annual
rate of return on the? bond?
A. 9 percent
B. 8 percent
C. 7 percent
D. 6 percent
17) The? ________ feature permits the issuer to repurchase
bonds at a stated price prior to maturity.
A. put
B. call
C. swap
D. conversion
18) A type of long?term financing used by both corporations
and government entities is? ________.
A. retained earnings
B. common stocks
C. bonds
D. preferred stocks
19) ? ________ rate of interest is the actual rate charged
by the supplier and paid by the demander of funds.
A. Nominal
B. Inflationary
C. Risk?free
D. Real
