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: (a)risk. (b) efficiency. (c)expected...

1. The market allocates capital to companies based on :

(a)risk.

(b) efficiency.

(c)expected returns.

(d)all of the above

2. Which of the following financial assets is likely to have the highest required rate of return based on risk?

(a)Corporate bond

(b)Treasury bill

(c)Certificate of Deposit

(d)Common stock

3. A bond that has a yield to maturity greater than its coupon interest rate will sell for a price:

(a)below par.

(b)at par.

(c)above par.

(d)that is equal to the face value of the bond plus the value of all interest payments.

4. Which of the following is not one of the components that makes up the required rate of return on a bond?

(a) Risk premium

(b) Real rate of return

(c) Inflation premium

(d) Maturity payment

5. A 20-year bond pays 12% on a face value of $1,000. If similar bonds are currently yielding 9%, What is the market value of the bond? Use annual analysis.

(a) over $1,000

(b) under $1,000

(c) over $1,200

(d) Not enough information given to tell

6. A ten-year bond, with par value equals $1000, pays 10% annually. If similar bonds are currently yielding 6% annually, what is the market value of the bond? Use semi-annual analysis.

(a) $1,000

(b)$1127.50

(c)$1297.85

(d)$2549.85

7. A 30-year zero-coupon bond that yields 12% percent is issued with a $1000 par value. What is the issuance price of the bond (round to the nearest dollar)?

(a)$33

(b) $83

(c) $8,333

(d) $3,888

8. A 14-year zero-coupon bond was issued with a $1000 par value to yield 12%. What is the approximate market value of the bond?

(a) $597

(b) $205

(c) $275

(d) $482

9. Which of the following does not influence the yield to maturity for a security?

(a) Required real rate of return

(b) Risk free rate

(c) Business risk

(d) Yields of similar securities

10. An increase in the riskiness of a particular security would NOT affect:

(a) the risk premium for that security.

(b) the premium for expected inflation.

(c)the total required return for the security.

(d)investors' willingness to buy the security.

11. If the inflation premium for a bond goes up, the price of the bond:

(a) is unaffected.

(b)goes down.

(c)goes up.

(d)is unpredictable.

12. The risk premium is likely to be highest for:

(a) U.S. government bonds.

(b) corporate bonds.

(c) gold mining expedition.

(d) Either b or c

13. 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)12.66%

(d)8.10%

(a)risk.

(b) efficiency.

(c)expected returns.

(d)all of the above

2. Which of the following financial assets is likely to have the highest required rate of return based on risk?

(a)Corporate bond

(b)Treasury bill

(c)Certificate of Deposit

(d)Common stock

3. A bond that has a yield to maturity greater than its coupon interest rate will sell for a price:

(a)below par.

(b)at par.

(c)above par.

(d)that is equal to the face value of the bond plus the value of all interest payments.

4. Which of the following is not one of the components that makes up the required rate of return on a bond?

(a) Risk premium

(b) Real rate of return

(c) Inflation premium

(d) Maturity payment

5. A 20-year bond pays 12% on a face value of $1,000. If similar bonds are currently yielding 9%, What is the market value of the bond? Use annual analysis.

(a) over $1,000

(b) under $1,000

(c) over $1,200

(d) Not enough information given to tell

6. A ten-year bond, with par value equals $1000, pays 10% annually. If similar bonds are currently yielding 6% annually, what is the market value of the bond? Use semi-annual analysis.

(a) $1,000

(b)$1127.50

(c)$1297.85

(d)$2549.85

7. A 30-year zero-coupon bond that yields 12% percent is issued with a $1000 par value. What is the issuance price of the bond (round to the nearest dollar)?

(a)$33

(b) $83

(c) $8,333

(d) $3,888

8. A 14-year zero-coupon bond was issued with a $1000 par value to yield 12%. What is the approximate market value of the bond?

(a) $597

(b) $205

(c) $275

(d) $482

9. Which of the following does not influence the yield to maturity for a security?

(a) Required real rate of return

(b) Risk free rate

(c) Business risk

(d) Yields of similar securities

10. An increase in the riskiness of a particular security would NOT affect:

(a) the risk premium for that security.

(b) the premium for expected inflation.

(c)the total required return for the security.

(d)investors' willingness to buy the security.

11. If the inflation premium for a bond goes up, the price of the bond:

(a) is unaffected.

(b)goes down.

(c)goes up.

(d)is unpredictable.

12. The risk premium is likely to be highest for:

(a) U.S. government bonds.

(b) corporate bonds.

(c) gold mining expedition.

(d) Either b or c

13. 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)12.66%

(d)8.10%

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