公司理财(英文版)题库5

CHAPTER 5

Interest Rate and Bond Valuation Multiple Choice Questions

I. DEFINITIONS

COUPON

a 1. The stated interest payment, in dollars, made on a bond each period is called the bond’s:

a. coupon.

b. face value.

c. maturity.

d. yield to maturity.

e. coupon rate.

Difficulty level: Easy

FACE VALUE

b 2. The principal amount of a bond that is repaid at the end of the loan term is called the bond’s:

a. coupon.

b. face value.

c. maturity.

d. yield to maturity.

e. coupon rate.

Difficulty level: Easy

MATURITY

c 3. The specifie

d dat

e on which the principal amount o

f a bond is repaid is called the bond’s:

a. coupon.

b. face value.

c. maturity.

d. yield to maturity.

e. coupon rate.

Difficulty level: Easy

YIELD TO MATURITY

d 4. Th

e rate o

f return required by investors in the market for ownin

g a bond is called the:

a. coupon.

b. face value.

c. maturity.

d. yield to maturity.

e. coupon rate.

Difficulty level: Easy

COUPON RATE

e 5. The annual coupon o

f a bond divided by its face value is called the bond’s:

a. coupon.

b. face value.

d. yield to maturity.

e. coupon rate.

Difficulty level: Easy

PAR BONDS

a 6. A bond with a face value of $1,000 that sells for $1,000 in the market is called a _____ bond.

a. par value

b. discount

c. premium

d. zero coupon

e. floating rate

Difficulty level: Easy

DISCOUNT BONDS

b 7. A bond with a face value of $1,000 that sells for less than $1,000 in the market is called a

_____ bond.

a. par

b. discount

c. premium

d. zero coupon

e. floating rate

Difficulty level: Easy

PREMIUM BONDS

c 8. A bon

d with a fac

e value o

f $1,000 that sells for more than $1,000 in the market is called a

_____ bond.

a. par

b. discount

c. premium

d. zero coupon

e. floating rate

Difficulty level: Easy

UNFUNDED DEBT

d 9. Th

e unfunded debt o

f a firm is generally understood to mean the firm’s:

a. preferred stock.

b. debts that mature in more than one year.

c. debentures.

d. debts that mature in less than one year.

e. secured debt.

Difficulty level: Easy

INDENTURE

a 10. The written, legally binding agreement between the corporate borrower and the lender detailing

the terms of a bond issue is called the:

b. covenant.

c. terms of trade.

d. form 5140.

e. call provision.

Difficulty level: Easy

REGISTERED BONDS

b 11. The form of bond issue in which the registrar of the company records ownership of each bond,

with relevant payments made directly to the owner of record, is called the _____ form.

a. new-issue

b. registered

c. bearer

d. debenture

e. collateral

Difficulty level: Medium

BEARER BONDS

c 12. The form of bon

d issu

e in which the bond is issued without record o

f the owner’s name, with

relevant payments made directly to whoever physically holds the bond, is called the _____

form.

a. new-issue

b. registered

c. bearer

d. debenture

e. collateral

Difficulty level: Easy

DEBENTURES

e 13. The unsecured debts o

f a firm with maturities greater than 10 years are most literally called:

a. unfunded liabilities.

b. sinking funds.

c. bonds.

d. notes.

e. debentures.

Difficulty level: Easy

NOTES

d 14. Th

e unsecured debts o

f a firm with maturities less than 10 years are most literally called:

a. unfunded liabilities.

b. sinking funds.

c. bonds.

d. notes.

e. debentures.

Difficulty level: Easy

SINKING FUND

a 15. An account managed by the bond trustee for early bond redemption payments is called a:

a. sinking fund.

b. collateral payment account.

c. deed in trust account.

d. call provision.

e. par value fund.

Difficulty level: Easy

CALL PROVISION

b 16. An agreement giving the bond issuer the option to repurchase the bond at a specified price prior

to maturity is the _____ provision.

a. sinking fund

b. call

c. seniority

d. collateral

e. trustee

Difficulty level: Easy

CALL PREMIUM

c 17. The amount by which the call price exceeds the bond’s par value is the:

a. coupon rate.

b. redemption value.

c. call premium.

d. original-issue discount.

e. call rate.

Difficulty level: Easy

SENIORITY

e 18. In the event o

f default, _____ debt holders must give preference to more _____ debt holders in

the priority of repayment distributions.

a. short-term; long-term

b. long-term; short-term

c. senior; junior

d. senior; subordinated

e. subordinated; senior

Difficulty level: Medium

DEFERRED CALL PROVISION

d 19. A deferred call provision refers to the:

a. open market price of a callable bond on a certain date.

b. seniority of callable bonds to noncallable bonds in the event of corporate default.

c. prohibition of a company from ever redeeming callable bonds.

d. prohibition of a company from redeeming callable bonds prior to a certain dat

e.

e. amount by which the call price for a callable bond exceeds its par value.

Difficulty level: Easy

TREASURY BONDS

a 20. The long-term bonds issued by the United States government are called _____ bonds.

a. Treasury

b. municipal

c. floating-rate

d. junk

e. zero coupon

Difficulty level: Easy

MUNICIPAL BONDS

b 21. The long-term bonds issued by state and local governments in the United States are called

_____ bonds.

a. Treasury

b. municipal

c. floating-rate

d. junk

e. zero coupon

Difficulty level: Easy

ZERO COUPON BONDS

e 22. A bond that makes no coupon payments and is initially priced at a deep discount is called a

_____ bond.

a. Treasury

b. municipal

c. floating-rate

d. junk

e. zero coupon

Difficulty level: Easy

FLOATING-RATE BONDS

c 23. A bon

d that pays a variabl

e amount o

f coupon interest over time is called a _____ bond.

a. Treasury

b. municipal

c. floating-rate

d. junk

e. zero coupon

Difficulty level: Easy

PROTECTIVE COVENANT

e 24. Parts o

f the indenture limitin

g certain actions that might be taken during the term of the loan to

protect the interests of the lender are called:

a. trustee relationships.

b. sinking funds provisions.

c. bond ratings.

d. deferred call provisions.

e. protective covenants.

Difficulty level: Easy

CONVERTIBLE BONDS

d 25. A bond which, at th

e election o

f the holder, can be swapped for a fixed number of shares of

common stock at any time prior to the bond’s maturity is called a _____ bond.

a. zero coupon

b. callable

c. putable

d. convertible

e. warrant

Difficulty level: Medium

PRICE TRANSPARENCY

a 26. A financial market is _____ if it is possible to easily observe its prices and trading volume.

a. transparent

b. open

c. ordered

d. in equilibrium

e. chaotic

Difficulty level: Medium

CURRENT YIELD

b 27. The annual coupon payment of a bond divided by its market price is called the:

a. coupon rate.

b. current yield.

c. yield to maturity.

d. bid-ask spread.

e. capital gains yield.

Difficulty level: Easy

TIP BONDS

b 28. A TIP bond’s interest rate is linked to:

a. income.

b. inflation.

c. liquidity.

d. maturity of the 30 year government bond.

e. corporate tax rates.

Difficulty level: Medium

PUT BOND

a 29. A bond that allows the holder to force the issuer to buy back bonds at a stated rate is called a:

a. put bond.

b. call bond.

c. guaranteed bon

d.

d. TIP bond.

e. none of the above.

Difficulty level: Medium

NOMINAL RATES

e 30. Interest rates or rates o

f return on investments that have not been adjusted for the effects of

inflation are called _____ rates.

a. coupon

b. stripped

c. effective

d. real

e. nominal

Difficulty level: Medium

REAL RATES

a 31. Interest rates or rates of return on investments that have been adjusted for the effects of

inflation are called _____ rates.

a. real

b. nominal

c. effective

d. stripped

e. coupon

Difficulty level: Medium

FISHER EFFECT

b 32. The relationship between nominal rates, real rates, and inflation is known as the:

a. Miller and Modigliani theorem.

b. Fisher effect.

c. Gordon growth model.

d. term structure of interest rates.

e. interest rate risk premium.

Difficulty level: Medium

TERM STRUCTURE OF INTEREST RATES

c 33. The relationship between nominal interest rates on default-free, pure discount securities an

d the

time to maturity is called the:

a. liquidity effect.

b. Fisher effect.

c. term structure of interest rates.

d. inflation premium.

e. interest rate risk premium.

Difficulty level: Medium

INFLATION PREMIUM

d 34. Th

e _____ premium is that portion o

f a nominal interest rate or bond yield that represents

compensation for expected future overall price appreciation.

a. default risk

b. taxability

c. liquidity

d. inflation

e. interest rate risk

Difficulty level: Easy

DEFAULT RISK PREMIUM

a 35. The _____ premium is that portion of a nominal interest rate or bond yield that represents

compensation for the possibility of nonpayment by the bond issuer.

a. default risk

b. taxability

c. liquidity

d. inflation

e. interest rate risk

Difficulty level: Easy

II. CONCEPTS

BOND FEATURES

d 36. A bond with a 7 % coupon that pays interest semi-annually and is priced at par will hav

e a

market price of _____ and interest payments in the amount of _____ each.

a. $1,007; $70

b. $1,070; $35

c. $1,070; $70

d. $1,000; $35

e. $1,000; $70

Difficulty level: Medium

BOND PRICES AND YIELDS

e 37. All else constant, a bond will sell at _____ when the yield to maturity is _____ the coupon rate.

a. a premium; higher than

b. a premium; equal to

c. at par; higher than

d. at par; less than

e. a discount; higher than

Difficulty level: Medium

BOND PRICES AND YIELDS

d 38. All els

e constant, a coupon bond that is selling at a premium, must have:

a. a coupon rate that is equal to the yield to maturity.

b. a market price that is less than par value.

c. semi-annual interest payments.

d. a yield to maturity that is less than the coupon rat

e.

e. a coupon rate that is less than the yield to maturity.

Difficulty level: Easy

BOND PRICES

c 39. The market price of a bon

d is equal to th

e present value o

f the:

a. face value minus the present value of the annuity payments.

b. annuity payments plus the future value of the face amount.

c. face value plus the present value of the annuity payments.

d. face value plus the future value of the annuity payments.

e. annuity payments minus the face value of the bond.

Difficulty level: Easy

BOND PRICES

a 40. As the yield to maturity increases, the:

a. amount the investor is willing to pay to buy a bond decreases.

b. longer the time to maturity.

c. lower the coupon rate desired by that investor.

d. higher the price the investor offers to buy a bond.

e. lower the rate of return desired by the investor.

Difficulty level: Easy

SEMIANNNUAL BONDS

e 41. American Fortunes is preparing a bond offering with an 8 % coupon rate. The

bonds will be repaid in 10 years. The company plans to issue the bonds at par value and pay

interest semiannually. Given this, which of the following statements are correct?

I. The initial selling price of each bond will be $1,000.

II. A fter the bonds have been outstanding for 1 year, you should use 9 as the number of compounding periods when calculating the market value of the bond.

III. Each interest payment per bond will be $40.

IV. The yield to maturity when the bonds are first issued is 8 %.

a. I and II only

b. II and III only

c. II, III, and IV only

d. I, II, and III only

e. I, III, and IV only

Difficulty level: Medium

SEMIANNUAL BONDS AND EFFECTIVE ANNUAL RATE

d 42. Th

e newly issued bonds o

f the Wynslow Corp. offer a 6 % coupon with semiannual interest

payments. The bonds are currently priced at par value. The effective annual rate provided by these bonds must be:

a. equal to 3 %.

b. greater than 3 % but less than 4 %.

c. equal to 6 %.

d. greater than 6 % but less than 7 %.

e. equal to 12 %.

Difficulty level: Medium

INTEREST RATE RISK

d 43. Which on

e o

f the followin

g statements is correct concerning interest rate risk as it relates to

bonds, all else equal?

a. The shorter the time to maturity, the greater the interest rate risk.

b. The higher the coupon rate, the greater the interest rate risk.

c. For a bond selling at par value, there is no interest rate risk.

d. The greater the number of semiannual interest payments, the greater the interest rate risk.

e. The lower the amount of each interest payment, the lower the interest rate risk.

Difficulty level: Medium

INTEREST RATE RISK

e 44. Which one o

f the followin

g bonds has the greatest interest rate risk?

a. 5-year; 9 % coupon

b. 5-year; 7 % coupon

c. 7-year; 7 % coupon

d. 9-year; 9 % coupon

e. 9-year; 7 % coupon

Difficulty level: Medium

INTEREST RATE RISK

b 45. Interest rate risk _____ as the time to maturity increases.

a. increases at an increasing rate

b. increases at a decreasing rate

c. increases at a constant rate

d. decreases at an increasing rate

e. decreases at a decreasing rate

Difficulty level: Medium

INTEREST RATE RISK

c 46. You own a bon

d that has a 7 % coupon and matures in 12 years. You purchased

this bond at par value when it was originally issued. If the current market rate for this

type and quality of bond is 7.5 %, then you would expect:

a. the bond issuer to increase the amount of each interest payment on these bonds.

b. the yield to maturity to remain constant due to the fixed coupon rate.

c. to realize a capital loss if you sold the bond at the market price today.

d. today’s market price to exceed the face value of the bond.

e. the current yield today to be less than 7 %.

Difficulty level: Medium

INTEREST RATE RISK

b 47. A brand with semi-annual interest payments, all else equal, would be priced _________ than

one with annual interest payments.

a. higher

b. lower

c. the same

d. it is impossible to tell

e. either higher or the same

Difficulty level: Medium

YIELD TO MATURITY AND CURRENT YIELD

e 48. All else constant, as the market price o

f a bond increases the current yield _____ and

the yield to maturity _____

a. increases; increases.

b. increases; decreases.

c. remains constant; increases.

d. decreases; increases.

e. decreases; decreases.

Difficulty level: Medium

BOND FEATURES

d 49. Which of th

e following statements concerning bond features is (are) correct?

I. Bondholders generally have voting power in a corporation.

II. Bond interest is tax-deductible as a business expense.

III. The repayment of the bond principle is tax-deductible.

IV. Failure to pay either the interest payments or the bond principle as agreed can cause a firm to go into bankruptcy.

a. II only

b. I and II only

c. III and IV only

d. II and IV only

e. II, III, and IV only

Difficulty level: Medium

BOND INDENTURE

d 50. Which of th

e following items are generally included in a bond indenture?

I. call provisions

II. security description

III. current yield

IV. protective covenants

a. I and II only

b. II and IV only

c. II, III, and IV only

d. I, II, and IV only

e. I, II, III, and IV

Difficulty level: Medium

BOND CLASSIFICATIONS

e 51. Which one o

f the followin

g statements is correct concerning bond classifications?

a. A debenture is a long-term bond secured by the fixed assets of a firm.

b. A mortgage security is a bond issued solely by a home builder.

c. A note is a bond which has an original maturity date longer than 10 years.

d. A subordinated bond receives preferential treatment over all other bonds in a

bankruptcy.

e. A callable bond can be repurchased by the issuer prior to the initial maturity date.

Difficulty level: Medium

CALLABLE BONDS

b 52. Callable bonds generally:

a. allow the bondholder to decide when the bond is to be called.

b. are associated with sinking funds.

c. permit the issuer to repurchase the bonds at a discount.

d. are called within the first couple of years after issuanc

e.

e. are required to have a deferred call provision if they have a “make-whole” call

provision.

Difficulty level: Medium

PROTECTIVE COVENANTS

c 53. Which of the following is a (are) positive covenant(s) that might be foun

d in a bond

indenture?

I. The company shall maintain a current ratio of 1.5 or better.

II. The company must limit the amount of dividends it pays according to the stated formula.

III. The company cannot lease any major assets without approval by the lender.

IV. The company must maintain the loan collateral in good working order.

a. I only

b. I and II only

c. I and IV only

d. II and IV only

e. I, II, and IV only

Difficulty level: Challenge

PROTECTIVE COVENANTS

e 54. Protective covenants:

a. are primarily designed to protect the issuing corporation from unreasonable demands

of bondholders.

b. are consistent for all bonds issued by a corporation within the United States.

c. are limited to stating actions which a firm must take.

d. only apply to bonds that have a deferred call provision.

e. are primarily designed to protect bondholders from future actions of the bond issuer.

Difficulty level: Medium

BOND RATINGS

b 55. Which one of the following statements concerning bond ratings is correct?

a. Standard and Poor’s and Value Line are the primary bond rating agencies.

b. Bond ratings are solely an assessment of the creditworthiness of the bond issuer.

c. Investment grade bonds include only those bonds receiving one of the highest three

bond ratings.

d. Bond ratings evaluate the expected price volatility of a bond issu

e.

e. All bonds receive the same rating classification from all rating agencies.

Difficulty level: Medium

BOND RATINGS

d 56. A “fallen angel” is a bond that:

a. lowered its annual interest payment.

b. has moved from being a long-term obligation to being a short-term obligation.

c. has moved from having a yield to maturity in excess of the coupon rate to having a

yield to maturity that is less than the coupon rate.

d. has moved from being an investment-grade bond to being a junk bond.

e. is rated as Ba by one rating agency and rated as BB by another rating agency.

Difficulty level: Medium

TREASURY BONDS

a 57.Bonds issued by the U.S. government:

I. are considered to be free of default risk.

II. are considered to be free of interest rate risk.

III. provide totally tax-free income.

IV. pay interest that is exempt from federal income taxes.

a. I only

b. I and III only

c. I and IV only

d. II and III only

e. II and IV only

Difficulty level: Medium

TREASURY BONDS

d 58. Treasury bonds are:

a. those bonds issued by any governmental agency in the U.S.

b. issued only on the first day of each fiscal year by the U.S. Department of Treasury.

c. preferred by high-income individuals because they offer the best tax benefits.

d. generally issued as coupon bonds.

e. totally risk-free.

Difficulty level: Medium

MUNICIPAL BONDS

a 59. Municipal bonds:

a. offer income tax advantages to individuals.

b. generally pay a higher rate of return than corporate bonds.

c. are those bonds issued only by local municipalities, such as a city or a borough.

d. are rarely callabl

e.

e. pay interest that is always exempt from both federal and state income taxes.

Difficulty level: Easy

TAXABLE VERSUS MUNICIPAL BONDS

d 60. Th

e break-even tax rate between a taxable corporate bond yielding 7 % and a

comparable nontaxable municipal bond yielding 5 % can be expressed as:

a. .07 ÷ (1 - t*) = .05.

b. .05 ÷ (1 - t*) = .07.

c. .07 + (1 - t*) = .05.

d. .07 ? (1 - t*) = .05.

e. .05 (1 - t*) = .07.

Difficulty level: Medium

ZERO COUPON BONDS

e 61. A zero coupon bond:

a. is sold at a large premium.

b. has a price equal to the future value of the face amount given a specified rate of

return.

c. can only be issued by the U.S. Treasury.

d. has less interest rate risk than a comparable coupon bond.

e. has implicit interest which is calculated by amortizing the loan.

Difficulty level: Medium

ZERO COUPON BONDS

b 62. The total interest paid on a zero-coupon bond is equal to:

a. zero.

b. the face value minus the issue price.

c. the face value minus the market price on the maturity date.

d. $1,000 minus the face valu

e.

e. $1,000 minus the par value.

Difficulty level: Medium

FLOATING-RATE BONDS

d 63. Th

e collar o

f a floating-rate bond refers to the minimum and maximum:

a. call periods.

b. maturity dates.

c. market prices.

d. coupon rates.

e. yields to maturity.

Difficulty level: Medium

FLOATING-RATE BONDS

d 64. Which of th

e following are common characteristics o

f floating-rate bonds?

I. adjustable coupon rates

II. adjustable maturity dates

III. put provision

IV. coupon cap

a. I and II only

b. II and III only

c. I, II, and IV only

d. I, III, and IV only

e. I, II, III, and IV

Difficulty level: Medium

FLOATING RATE BONDS

c 65. A corporation is more prone to issue floating-rate bonds when they expect future

interest rates to _____ over the life of the bond.

a. remain constant

b. increase briefly and then decline slightly

c. continually decline

d. decline briefly and then increase significantly

e. continually increase

Difficulty level: Easy

YIELD TO MATURITY

e 66. The yield to maturity is

a. the rate that equates the price of the bond with the discounted cash flows.

b. the expected rate to be earned if held to maturity.

c. the rate that is used to determine the market price of the bon

d.

d. equal to the current yield for bonds priced at par.

e. All of the above.

Difficulty level: Medium

TYPES OF BONDS AND INVESTOR PREFERENCES

c 67. Investors generally ten

d to buy:

a. Treasury bonds for their high yields.

b. municipal bonds for their high yields.

c. convertible bonds for their potential price appreciation.

d. corporate bonds for their liquidity.

e. Treasury bonds for their preferential tax treatment.

Difficulty level: Medium

TYPES OF BONDS

b 68. A convertible bond is a bond that can be:

a. exchanged for cash at prescribed points in time.

b. exchanged for a stated number of shares of common stock of the bond issuer.

c. modified from a fixed coupon bond into a floating coupon bond at prescribed points in

time.

d. submitted to the issuer for redemption at the discretion of the bondholder.

e. submitted for payment any time the economy converts into a recessionary period.

Difficulty level: Easy

PUT PROVISION

c 69. A put provision in a bon

d indentur

e allows:

a. a bond issuer to recall the bond after a specified period of time at a price that exceeds

the face amount.

b. a bondholder to force the issuer to increase the coupon rate if inflation increases by more than a

specified amount.

c. the bondholder to force the issuer to buy back the bond at a specified price prior to

maturity.

d. the issuer to convert a coupon bond into a zero coupon bond at their discretion.

e. t he issuer to suspend interest payments for any year in which the interest expense exceeds the

net income of the firm.

Difficulty level: Easy

FACE VALUE

e 70. Face value is

a. always higher than current price.

b. always lower than current price.

c. the same as the current price.

d. the coupon amount.

e. None of the above.

Difficulty level: Easy

BASIS POINT

a 71. One basis point is equal to:

a. .01 %.

b. .10 %.

c. 1.0 %.

d. 10 %.

e. 100 %.

Difficulty level: Easy

CORPORATE BOND QUOTE

c 72. The “EST SPREAD” shown in The Wall Street Journal listing of corporate bonds

represents the estimated:

a. yield to maturity.

b. difference between the current yield and the yield to maturity.

c. difference between the bond’s yield and the yield of a particular Treasury issue.

d. range of yields to maturity provided by the bond over its life to dat

e.

e. difference between the yield to call and the yield to maturity.

Difficulty level: Medium

COUPON PAYMENT

b 73. A bond is listed in The Wall Street Journal as a 12 3/4s of July 2009. This bonds pays

a. $127.50 in July and January.

b. $63.75 in July and January.

c. $127.50 in July.

d. $63.75 in July.

e. None of the above.

Difficulty level: Easy

YIELD TO MATURITY

c 74. If its yiel

d to maturity is less than its coupon rate, a bond will sell at a _____, and increases in

market interest rates will _____.

a. discount; decrease this discount.

b. discount; increase this discount.

c. premium; decrease this premium.

d. premium; increase this premium.

e. None of the above.

Difficulty level: Medium

CLEAN VERSUS DIRTY PRICES

c 75. Today, August 13, you want to buy a bon

d with a quoted pric

e o

f 101.5. The bond

pays interest on February 1 and August 1. The price you will pay to purchase this

bond is equal to the:

a. clean price.

b. muddy price.

c. dirty price.

d. par value pric

e.

e. bid price.

Difficulty level: Medium

REAL RATE OF RETURN

d 76. Th

e increase you realize in buying power as a result o

f ownin

g a bond is referred to as

the _____ rate of return.

a. inflated

b. realized

c. nominal

d. real

e. risk-free

Difficulty level: Easy

FISHER EFFECT

e 77. The Fisher formula is expressed as:

a. 1 + r = (1 + R) ÷ (1 + h).

b. 1 + r = (1 + R) ? (1 + h).

c. 1 + h = (1 + r) ÷ (1 + R).

d. 1 + R = (1 + r) ÷ (1 + h).

e. 1 + R = (1 + r) ? (1 + h).

Difficulty level: Medium

FISHER EFFECT

d 78. Th

e Fisher Effect primarily emphasizes the effects o

f _____ risk on an investor’s rate

of return.

a. default

b. market

c. interest rate

d. inflation

e. maturity

Difficulty level: Easy

TERM STRUCTURE OF INTEREST RATES

a 79. The term structure of interest rates reflects the:

a. pure time value of money for various lengths of time.

b. actual risk premium being paid for corporate bonds of varying maturities.

c. pure inflation adjustment applied to bonds of various maturities.

d. interest rate risk premium applicable to bonds of varying maturities.

e. nominal interest rates applicable to coupon bonds of varying maturities.

Difficulty level: Easy

BOND VALUES

a 80. The market price of _____ maturity bonds fluctuates _____ compared with _____ maturity

bonds as interest rates change.

a. shorter; less; longer

b. longer; less; shorter

c. shorter; more; longer

d. Both B and c.

e. None of the above.

Difficulty level: Medium

CORPORATE VERSUS TREASURY BONDS

c 81. Two of the primary differences between a corporate bon

d and a Treasury bond with

identical maturity dates are related to:

a. interest rate risk and time value of money.

b. time value of money and inflation.

c. taxes and potential default.

d. taxes and inflation.

e. inflation and interest rate risk.

Difficulty level: Medium

III. PROBLEMS

BOND VALUATION

c 82. Consider a bon

d which pays 7% semiannually and has 8 years to maturity. Th

e market requires

an interest rate of 8% on bonds of this risk. What is this bond's price?

a. $ 942.50

b. $ 911.52

c. $ 941.74

d. $1,064.81

e. None of the above.

Difficulty level: Easy

ZERO COUPON BOND

a 83. The value of a 20 year zero-coupon bond when the market required rate of return of 9%

(semiannual) is ____ .

a. $171.93

b. $178.43

c. $318.38

d. $414.64

e. None of the above.

Difficulty level: Easy

YIELD TO MATURITY

c 84. The bonds issue

d by Jensen & Son bear a 6 % coupon, payabl

e semiannually. The bond

matures in 8 years and has a $1,000 face value. Currently, the bond sells at par. What is the

yield to maturity?

a. 5.87 %

b. 5.97 %

c. 6.00 %

d. 6.09 %

e. 6.17 %

Difficulty level: Medium

YIELD TO MATURITY

a 85. A General Co. bond has an 8 % coupon and pays interest annually. The face value is $1,000

and the current market price is $1,020.50. The bond matures in 20 years. What is the yield to

maturity?

a. 7.79 %

b. 7.82 %

c. 8.00 %

d. 8.04 %

e. 8.12 %

Difficulty level: Easy

YIELD TO MATURITY

d 86. Winston Enterprises has a 15-year bond issu

e outstanding that pays a 9 % coupon. The bond is

currently priced at $894.60 and has a par value of $1,000. Interest is paid semiannually. What is the yield to maturity?

a. 8.67 %

b. 10.13 %

c. 10.16 %

d. 10.40 %

e. 10.45 %

Difficulty level: Medium

PRICE OF COUPON BOND

a 87. Wine and Roses, Inc. offers a 7 % coupon bond with semiannual payments and a yield to

maturity of 7.73 %. The bonds mature in 9 years. What is the market price of a $1,000 face

value bond?

a. $953.28

b. $953.88

c. $1,108.16

d. $1,401.26

e. $1,401.86

Difficulty level: Medium

PRICE OF COUPON BOND

c 88. Party Time, Inc. has a 6 % coupon bon

d that matures in 11 years. Th

e bond pays interest

semiannually. What is the market price of a $1,000 face value bond if the yield to maturity is

12.9 %?

a. $434.59

b. $580.86

c. $600.34

d. $605.92

e. $947.87

Difficulty level: Medium

PRICE OF COUPON BOND

d 89. Gugenheim, Inc. offers a 7 % coupon bond with annual payments. Th

e yield to

maturity is 5.85 % and the maturity date is 9 years. What is the market price of a

$1,000 face value bond?

a. $742.66

b. $868.67

c. $869.67

d. $1,078.73

e. $1,079.59

Difficulty level: Easy

TIME TO MATURITY OF COUPON BOND

a 90. The Lo Sun Corporation offers a 6 % bond with a current market price of

$875.05. The yield to maturity is 7.34 %. The face value is $1,000. Interest is

paid semiannually. How many years is it until this bond matures?

a. 16 years

b. 18 years

c. 24 years

d. 30 years

e. 36 years

Difficulty level: Medium

TIME TO MATURITY OF COUPON BOND

b 91. High Noon Sun, Inc. has a 5 %, semiannual coupon bond with a current market

price of $988.52. The bond has a par value of $1,000 and a yield to maturity of 5.29

%. How many years is it until this bond matures?

a. 4.0 years

b. 4.5 years

c. 6.5 years

d. 8.0 years

e. 9.0 years

Difficulty level: Medium

PRICE OF ZERO COUPON BOND

公司理财(英文版)题库2说课讲解

公司理财(英文版)题 库2

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公司理财(英文版)题库2

CHAPTER 2 Financial Statements & Cash Flow Multiple Choice Questions: I. DEFINITIONS BALANCE SHEET b 1. The financial statement showing a firm’s accounting value on a particular date is the: a. income statement. b. balance sheet. c. statement of cash flows. d. tax reconciliation statement. e. shareholders’ equity sheet. Difficulty level: Easy CURRENT ASSETS c 2. A current asset is: a. an item currently owned by the firm. b. an item that the firm expects to own within the next year. c. an item currently owned by the firm that will convert to cash within the next 12 months. d. the amount of cash on hand the firm currently shows on its balance sheet. e. the market value of all items currently owned by the firm. Difficulty level: Easy LONG-TERM DEBT b 3. The long-term debts of a firm are liabilities: a. that come due within the next 12 months. b. that do not come due for at least 12 months. c. owed to the firm’s suppliers. d. owed to the firm’s shareholders. e. the firm expects to incur within the next 12 months. Difficulty level: Easy NET WORKING CAPITAL e 4. Net working capital is defined as: a. total liabilities minus shareholders’ equity. b. current liabilities minus shareholders’ equity. c. fixed assets minus long-term liabilities. d. total assets minus total liabilities. e. current assets minus current liabilities. Difficulty level: Easy LIQUID ASSETS d 5. A(n) ____ asset is on e which can be quickly converted into cash without significant loss in value.

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2. Annuities where the payments occur at the end of each time period are called _____, whereas _____ refer to annuity streams with payments occurring at the beginning of each time period. A. ordinary annuities; early annuities B. late annuities; straight annuities C. straight annuities; late annuities D. annuities due; ordinary annuities E.ordinary annuities; annuities due Difficulty level: Easy Topic: ANNUITIES DUE Type: DEFINITIONS

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CHAPTER 8 Making Capital Investment Decisions I. DEFINITIONS INCREMENTAL CASH FLOWS a 1. The changes in a firm's future cash flows that are a direct consequence of accepting a project are called _____ cash flows. a. incremental b. stand-alone c. after-tax d. net present value e. erosion Difficulty level: Easy EQUIVALENT ANNUAL COST e 2. The annual annuity stream o f payments with the same present value as a project's costs is called the project's _____ cost. a. incremental b. sunk c. opportunity d. erosion e. equivalent annual Difficulty level: Easy SUNK COSTS c 3. A cost that has already been paid, or the liability to pay has already been incurred, is a(n): a. salvage value expense. b. net working capital expense. c. sunk cost. d. opportunity cost. e. erosion cost. Difficulty level: Easy OPPORTUNITY COSTS d 4. Th e most valuable investment given up i f an alternative investment is chosen is a(n): a. salvage value expense. b. net working capital expense.

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CHAPTER 20 INTERNATIONAL CORPORATE FINANCE Answers to Concepts Review and Critical Thinking Questions 1. a. The dollar is selling at a premium because it is more expensive in the forward market than in the spot market (SFr 1.53 versus SFr 1.50). b.The franc is expected to depreciate relative to the dollar because it will take more francs to buy one dollar in the future than it does today. c.Inflation in Switzerland is higher than in the United States, as are nominal interest rates. 2.The exchange rate will increase, as it will take progressively more pesos to purchase a dollar. This is the relative PPP relationship. 3.a.The Australian dollar is expected to weaken relative to the dollar, because it will take more A$ in the future to buy one dollar than it does today. b.The inflation rate in Australia is higher. c.Nominal interest rates in Australia are higher; relative real rates in the two countries are the same. 4. A Yankee bond is most accurately described by d. 5. No. For example, if a cou ntry’s currency strengthens, imports bee cheaper (good), but its exports bee more expensive for others to buy (bad). The reverse is true for currency depreciation. 6.Additional advantages include being closer to the final consumer and, thereby, saving on transportation, significantly lower wages, and less exposure to exchange rate risk. Disadvantages include political risk and costs of supervising distant operations. 7. One key thing to remember is that dividend payments are made in the home currency. More generally, it may be that the owners of the multinational are primarily domestic and are ultimately concerned about their wealth denominated in their home currency because, unlike a multinational, they are not internationally diversified.

英文版罗斯公司理财习题答案

CHAPTER 8 MAKING CAPITAL INVESTMENT DECISIONS Answers to Concepts Review and Critical Thinking Questions 1. In this context, an opportunity cost refers to the value of an asset or other input that will be used in a project. The relevant cost is what the asset or input is actually worth today, not, for example, what it cost to acquire. 2. a.Yes, the reduction in the sales of the company’s other products, referred to as erosion, and should be treated as an incremental cash flow. These lost sales are included because they are a cost (a revenue reduction) that the firm must bear if it chooses to produce the new product. b. Yes, expenditures on plant and equipment should be treated as incremental cash flows. These are costs of the new product line. However, if these expenditures have already occurred, they are sunk costs and are not included as incremental cash flows. c. No, the research and development costs should not be treated as incremental cash flows. The costs of research and development undertaken on the product during the past 3 years are sunk costs and should not be included in the evaluation of the project. Decisions made and costs incurred in the past cannot be changed. They should not affect the decision to accept or reject the project. d. Yes, the annual depreciation expense should be treated as an incremental cash flow. Depreciation expense must be taken into account when calculating the cash flows related to a given project. While depreciation is not a cash expense that directly affects c ash flow, it decreases a firm’s net

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CHAPTER 9 Risk Analysis, Real Options, and Capital Budgeting Multiple Choice Questions: I、DEFINITIONS SCENARIO ANALYSIS b 1、An analysis of what happens to the estimate of the net present value when you examine a number of different likely situations is called _____ analysis、 a、forecasting b、scenario c、sensitivity d、simulation e、break-even Difficulty level: Easy SENSITIVITY ANALYSIS c 2、An analysis of what happens to the estimate of net present value when only one variable is changed is called _____ analysis、 a、forecasting b、scenario c、sensitivity d、simulation e、break-even Difficulty level: Easy SIMULATION ANALYSIS d 3、An analysis which combines scenario analysis with sensitivity analysis is called _____ analysis、 a、forecasting b、scenario c、sensitivity d、simulation e、break-even Difficulty level: Easy BREAK-EVEN ANALYSIS e 4、An analysis o f the relationship between the sales volume and various measures of profitability is called _____ analysis、 a、forecasting b、scenario c、sensitivity d、simulation e、break-even Difficulty level: Easy VARIABLE COSTS a 5、Variable costs: a、change in direct relationship to the quantity of output produced、 b、are constant in the short-run regardless of the quantity of output produced、 c、reflect the change in a variable when one more unit of output is produce d、

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公司理财(英文版)题库15

CHAPTER 15 Capital Structure: Basic Concepts Multiple Choice Questions: I. DEFINITIONS HOMEMADE LEVERAGE a 1. The use of personal borrowing to change the overall amount of financial leverage to which an individual is exposed is called: leverage. a. homemade recapture. b. dividend c. the weighted average cost of capital. d. private placement. debt offset. e. personal Difficulty level: Easy MM PROPOSITION I b 2. The proposition that the value of the firm is independent of its capital structure is called: a. the capital asset pricing model. b. MM Proposition I. c. MM Proposition II. d. the law of one pric e. e. the efficient markets hypothesis. Difficulty level: Easy MM PROPOSITION II c 3. The proposition that the cost of equity is a positive linear function of capital structure is called: a. the capital asset pricing model. b. MM Proposition I. c. MM Proposition II. d. the law of one pric e. e. the efficient markets hypothesis. Difficulty level: Medium INTEREST TAX SHIELD a 4. The tax savings of the firm derived from the deductibility of interest expense is called the: a. interest shield. tax basis. b. depreciable umbrella. c. financing d. current yield. e. tax-loss carryforward savings. Difficulty level: Easy

完整word版公司理财英文版题库7

CHAPTER 7 Net Present Value and Other Investment Rules Multiple Choice Questions: I. DEFINITIONS NET PRESENT V ALUE a 1. The difference between the present value of an investment and its cost is the: a. net present value. b. internal rate of return. c. payback perio d. d. profitability index. e. discounted payback period. Difficulty level: Easy NET PRESENT V ALUE RULE c 2. Which one of the following statements concerning net present value (NPV) is correct? a. An investment should be accepted if, and only if, the NPV is exactly equal to zero. b. An investment should be accepted only if the NPV is equal to the initial cash flow. c. An investment should be accepted if the NPV is positive and rejected if it is negative. d. An investment with greater cash inflows than cash outflows, regardless of when the cash flows occur, will always have a positive NPV and therefore should always be accepted. e. Any project that has positive cash flows for every time period after the initial investment should be accepted. Difficulty level: Easy PAYBACK c 3. The length of time require d for an investment to generat e cash flows sufficient to recover the initial cost o f the investment is called the: a. net present value. b. internal rate of return. c. payback perio d. d. profitability index. e. discounted cash period. Difficulty level: Easy

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Chapter 02 Financial Statements and Cash Flow Answer Key Multiple Choice Questions 1.The financial statement showing a firm's accounting value on a particular date is the: A.income statement. B.balance sheet. C.statement of cash flows. D.tax reconciliation statement. E.shareholders' equity sheet. Difficulty level: Easy Topic: BALANCE SHEET Type: DEFINITIONS 2.A current asset is: A.an item currently owned by the firm. B.an item that the firm expects to own within the next year. C.an item currently owned by the firm that will convert to cash within the next 12 months. D.the amount of cash on hand the firm currently shows on its balance sheet. E.the market value of all items currently owned by the firm. Difficulty level: Easy Topic: CURRENT ASSETS Type: DEFINITIONS

公司理财(英文版)题库

v .. . .. CHAPTER 2 Financial Statements & Cash Flow Multiple Choice Questions: I. DEFINITIONS BALANCE SHEET b 1. The financial statement showing a firm’s accounting value on a particular date is the: a. income statement. b. balance sheet. c. statement of cash flows. d. tax reconciliation statement. e. shareholders’ equity sheet. Difficulty level: Easy CURRENT ASSETS c 2. A current asset is: a. an item currently owned by the firm. b. an item that the firm expects to own within the next year. c. an item currently owned by the firm that will convert to cash within the next 12 months. d. the amount of cash on hand the firm currently shows on its balance sheet. e. the market value of all items currently owned by the firm. Difficulty level: Easy LONG-TERM DEBT b 3. The long-term debts of a firm are liabilities: a. that come due within the next 12 months. b. that do not come due for at least 12 months. c. owed to the firm’s suppliers. d. owed to the firm’s shareholders. e. the firm expects to incur within the next 12 months. Difficulty level: Easy NET WORKING CAPITAL e 4. Net working capital is defined as: a. total liabilities minus shareholders’ equity. b. current liabilities minus shareholders’ equity.

罗斯公司理财Chap001全英文题库及答案

Chapter 01 Introduction to Corporate Finance Answer Key Multiple Choice Questions 1. The person generally directly responsible for overseeing the tax management, cost accounting, financial accounting, and information system functions is the: A. treasurer. B. director. C. controller. D. chairman of the board. E. chief executive officer. Difficulty level: Easy Topic: CONTROLLER Type: DEFINITIONS 2. The person generally directly responsible for overseeing the cash and credit functions, financial planning, and capital expenditures is the: A. treasurer. B. director. C. controller. D. chairman of the board. E. chief operations officer.

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