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Question
Which of the following statements is CORRECT?a. A bond is likely to be called if its market price is below its par value.
b. Even if a bond's YTC exceeds its YTM, an investor with an investment horizon longer than the bond's maturity would be worse off if the bond were called.
c. A bond is likely to be called if its market price is equal to its par value.
d. A bond is likely to be called if it sells at a discount below par.
e. A bond is likely to be called if its coupon rate is below its YTM.
Answer
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You are given the following returns on "the market" and Stock F during the last three years. We could calculate beta using data for Years 1 and 2 and then, after Year 3, calculate a new beta for Years 2 and 3. How different are those two betas, i.e., what's the value of beta 2 - beta 1? (Hint: You can find betas using the Rise-Over-Run method, or using your calculator's regression function.) Year Market Stock F1 6.10% 6.50%2 12.90% -3.70%3 16.20% 21.71%a. 7.89b. 8.30c. 8.74d. 9.20e. 9.66
Q:
In a portfolio of three different stocks, which of the following could NOT be true?
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b. The beta of the portfolio is less than the betas of each of the individual stocks.
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d. The beta of the portfolio cannot be equal to 1.
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a. capital budgeting project cash flows.
b. debt cash flows.
c. pension fund cash flows.
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b. The flotation costs associated with issuing new bonds rise.
c. The firm's CFO believes that interest rates are likely to decline in the future.
d. The firm's CFO believes that corporate tax rates are likely to be increased in the future.
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Suppose that you're planning a vacation and borrow $2,000 from a bank for one year at a stated annual interest rate of 14 percent, with interest prepaid (a discounted loan). Also, assume that the bank requires you to maintain a compensating balance equal to 20 percent of the initial loan value. What effective annual interest rate are you being charged?a. 14.00%b. 8.57%c. 16.28%d. 21.21%e. 28.00%
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Which of the following is not correct for a firm with seasonal sales and customers who all pay promptly at the end of 30 days?
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b. The level of accounts receivable will be constant from month to month.
c. The ratio of accounts receivable to sales will vary from month to month.
d. The level of accounts receivable at the end of each quarter will be the same.
e. DSO will vary from month to month.
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a. True
b. False