1) The less certain a cash flow, the ________ the risk, and the ________ the present value of the cash flow.

A) lower; higher

B) lower; lower

C) higher; lower

D) higher; higher

2) ________ of all future cash flows an asset is expected to provide over a relevant time period is the market value of the asset.

A) The future value

B) The present value

C) The stated value

D) The sum

3) In the present value model, risk is generally incorporated into the

A) cash flows.

B) timing.

C) discount rate.

D) total value.

4) Corporate bonds typically have

A) a face value of $5,000.

B) a market price of $1,000.

C) a specified coupon rate paid annually.

D) a par value of $1,000.

5) The value of a bond is the present value of the

A) dividends and maturity value.

B) interest and dividend payments.

C) maturity value.

D) interest payments and maturity value.

6) If the required return is less than the coupon rate, a bond will sell at

A) par.

B) a discount.

C) a premium.

D) book value.

7) If bankruptcy were to occur, stockholders would have prior claim on assets over

A) preferred stockholders.

B) secured creditors.

C) unsecured creditors.

D) no one.

8) Key differences between common stock and bonds include all of the following EXCEPT

A) common stockholders have a voice in management; bondholders do not.

B) common stockholders have a senior claim on assets and income relative to bondholders.

C) bonds have a stated maturity but stock does not.

D) interest paid to bondholders is tax-deductible but dividends paid to stockholders are not.

9) ________ are promised a fixed periodic dividend that must be paid prior to paying any common stock dividends.

A) Preferred stockholders

B) Common stockholders

C) Bondholders

D) Creditors

10) If expected return is less than required return on an asset, rational investors will

A) buy the asset, which will drive the price up and cause expected return to reach the level of the required return.

B) sell the asset, which will drive the price down and cause the expected return to reach the level of the required return.

C) sell the asset, which will drive the price up and cause the expected return to reach the level of the required return.

D) buy the asset, since price is expected to increase.

11) Shares of stock currently owned by the firm's shareholders are called

A) authorized.

B) issued.

C) outstanding.

D) treasury shares.

12)__________are the shares of common stock that a firms corporate charter allows it to issue.

A) authorized.

B) issued.

C) outstanding.

D) treasury shares.

13) the Increase in the expected dividends or dividend growth while the required return constant lead to _________in the price of the stock

A) Increase

B) Decrease

C) No change

14) the decrease in the expected dividends or dividend growth while the required return constant lead to ________ in the price of the stock

A) Increase

B) Decrease

C) No change

15) the increase in the required return while the expected dividends and dividend growth constant lead to the__________ in the price of the stock

A) Increase

B) Decrease

C) No change

16) the decrease in the required return while the expected dividends and dividend growth constant lead to the_________ in the price of the stock

A) Increase

B) Decrease

C) No change

17)_________is a characterise that gives the issuer the opportunity to repurchase bonds at a stated price prior to maturity.

A) call feature

B) conversion feature

C) hybrid feature

18) The nominal rate of interest is

A) the actual rate of interest charged by the supplier of funds and paid by the demander.

B) is the rate that creates equilibrium between the supply of savings and the demand for investment funds in a perfect world.

C) all of the Above

19) which sentence describe the meaning of real interest rate

A) creates equilibrium between the supply of savings and the demand for investment funds

B) perfect world, without inflation, no liquidity preference and there is no risk

C) all of the Above

20) is the total return anticipated on a bond if the bond is held until it matures.

A) yield to Maturity

B) yield to Call

C) None of the above

21) Characteristics of Eurobond

A) issue in a home currency by foreign entity

B) issue in a foreign currency by home(local) or foreign entity or

C) issue in a home currency by home(local) entity

22) Characteristics of Foreign bond

A) issue in a home currency by foreign entity

B) issue in a foreign currency by home(local) or foreign entity or

C) issue in a home currency by home(local) entity

23) ________ is the process of evaluating and selecting long-term investments consistent with the firm's goal of owner wealth maximization.

A) Recapitalizing assets

B) Capital budgeting

C) Ratio analysis

24) Projects that compete with one another, so that the acceptance of one eliminates the others from further consideration are called

A) independent projects.

B) mutually exclusive projects.

C) replacement projects.

25) what is the RIGHT about using payback approach?

A) payback period is less than the maximum acceptable payback period, accept the project.

B) payback period is greater than the maximum acceptable payback period, reject the project.

C) all of the above

26) which group is the CORRECT one regarding to the capital budgeting techniques

A) Payback Period, Discounted payback period, Net Present Value (NPV), Internal rate of return (IRR)

B) Payback Period, Discounted payback period, Present Value (NPV), Internal rate of return (IRR)

C) Payback Period, Discounted payback period, Present Value (NPV), Nominal rate of return (NRR)