1) If everything else is assumed constant, as the investor's required rate of return decreases, the value of a security _____.

		stays the same
		increases
		decreases
		has no relation to the investor's required rate of return

2)

Which of the following components [A., B. and C.] make up the Risk Free Rate?

A. Real Return

B. Expected Inflation

C. Risk

Both A. and B .

Both B. and C.

All of the above [A., B. and C.] make up the Risk Free Rate.

3)

What is the Price/Value of a 7-year, $1,000 par bond with a 6% coupon. The market interest rate is 12%.

$1,000.00

$876.66

$726.17

$1,060.00

4)

The Market Interest Rate is equivalent to the _____.

Yield to Call [YTC]

Yield to Maturity {YTM}

Federal Funds Rate

5) Only the cost of ___ is reduced by the tax rate in the WACC.

preferred stock

retained earnings

new common stock

debt

6) Yesterday, you calculated the value of an annuity that you might buy using the current investment rate of 4.72%. Today, however, your investment interest rate has increased to 5.23%. What has happened to the value of the annuity?

Nothing, as changing interest rates do not affect the value of annuities.

The annuity value increased.

The annuity value decreased.

All of the above.

7) A graph of debt securities yields versus time to maturity for similar risk securities is called a(n) ____.

		ugly plot
		yield curve
		annuity plot
		none of the above

8) There are three components of the nominal interest rate; the component indicating the compensation an investor must receive for giving up immediate gratification of using money is the _____. [Video]

		risk premium
		expected inflation
		real return
		expected variance

9) The organization in the United States considered to be risk free is _____.

		county governments
		state governments
		Uncle Sugar (U. S. Government)

10) What is the P/E ratio of a stock?

		The total value of the company's outstanding shares.
		The ratio of dividends paid to share price.
		The ratio of stock price to earnings.
		None of the above.

11) Larry wants to spend $200,000 a year during his retirement over an expected 25 years. If Larry expects his retirement account can earn 4.37% over his retirement, about how much does Larry need in his retirement account when he retires?

		$5,000,000.00
		$8,756,732,90
		$3,005,730.35
		Not enough information to work the problem.

12) A(n) ___ bond can be exchanged for stock.

		putable
		convertible
		indexed
		income

13) An already issued stock is traded in the ____ market.

		U.S. government action
		secondary
		primary
		foreign government

14) In calculating the WACC, the weight [percent] of each component of the WACC is determined using the ______.

		firm's Assets
		firm's Capital Structure
		the distribution of Net Income
		All of the above