103. If the inflation premium for a bond goes up, the price of the bond An excellent. is unaffected. B. goes down. C. goes up. D. need more information.
104. If the yield to maturity on a bond is greater than the coupon rate, you can assume: An effective. interest rates have decreased B. the price is below the par C. the price is above the par D. risk premiums have decreased
105. The risk premium is likely to be highest for A beneficial. government bonds. B. corporate bonds. C. utility company stock. D. either b or c.
106. The return measure that an investor demands for giving up current use of funds, without adjusting for purchasing power changes or the real rate of return, is the A. risk premium. B. inflation premium. C. dividend yield. D. discount rate.
107. A ten-year bond pays 11% interest on a $1000 face value annually. If it currently sells for $1,195, what is its approximate yield to maturity? A. 9.33% B. 7.94% C. % D. 8.10%
108. changes at a constant level for each percentage change of yield to maturity. B. is an inverse relationship. D. a and b.
C. try a beneficial linear matchmaking
109. The longer the time to maturity: A. the greater the price increase from an increase in interest rates. B. the less the price increase from an increase in interest rates. C. the greater the price increase from a decrease in interest rates. D. the less the price decrease from a decrease in interest rates.
110. What is the approximate yield to maturity for a seven-year bond that pays 11% interest on a $1000 face value annually if the bond sells for $952 A. 10.5% B. 10.6% C. 11.5% D. 12.1%
111. A higher interest rate (discount rate) would A. reduce the price of corporate bonds. B. reduce the price of preferred stock. C. reduce the price of common stock. D. all of these.
112. A 15-year bond pays 11% on a face value of $1,000. If similar bonds are currently yielding 8%, what is the market value of the bond? A. Over $1,000 B. Under $1,000 C. Over $1,200 D. Not enough information to tell
113. A 10-year bond pays 8% on a face value of $1,000. If similar bonds are currently yielding 10%, what is the market value of the bond? A. Less than $900 B. More than $900 and less than $1100 C. More than $1100 D. Not enough information to tell
114. An issue of preferred stock is paying an annual dividend of $5. The growth rate for the firm’s common stock is 14%. What is the preferred stock price if the required rate of return is 11%? A. $ B. $ C. $ D. none of these
115. Which is a characteristic of the price of preferred stock? A. Since preferred stock dividends are fixed, they are tax deductible. B. Because preferred stock has no maturity, the price analysis is similar to that of debt. C. Preferred stock is valued as a perpetuity. D. None of these.
116. Preferred stock has all but which of the following characteristics? A. no stated maturity B. a fixed dividend payment that carries a higher precedence than common stock dividends C. the same binding contractual obligation as debt D. preferred lacks the ownership privilege of common stock
117. The price of preferred stock may react strongly to a change in k p because A. preferred stock may be cumulative. B. preferred stock dividends have to be paid before common stock dividends. C. there is no maturity date. D. corporate recipients of preferred stock dividends may receive a partial tax exemption.