35.The dirty price of a bond is defined as the:

Multiple Choice

• clean price minus any taxes due on the accrued interest.
• quoted price plus the accrued interest.
• clean price minus the accrued interest.
• market price minus any taxes due on the accrued interest.
• market price minus the accrued interest.

36.The principal amount of a bond that is repaid at the end of the loan term is called the bond's:

Multiple Choice

• yield to maturity.
• coupon rate.
• face value.
• maturity.
• coupon.

37.The rate of return required by investors in the market for owning a bond is called the:

Multiple Choice

• yield to maturity.
• coupon rate.
• maturity.
• coupon.
• face value.

38.A project has an initial cost of $26,000, a discount rate of 11.7 percent, a life of 5 years, and an NPV of $11,216. Given this, you know that the project is expected to earn a return:

Multiple Choice

• equal to 11.7 percent of $37,216 (= $26,000 + 11,216).
• of $26,000 minus $11,216.
• equal to 11.7 percent of $26,000 plus an additional $11,216.
• of $11,216 in total.
• of 11.7 percent of $11,216.

39.The specified date on which the principal amount of a bond is repaid is called the bond's:

Multiple Choice

• coupon rate.
• maturity.
• face value.
• yield to maturity.
• coupon.

40.Which entity provides a daily snapshot of bond prices for the most active issues?

Multiple Choice

• US Treasury Department
• SEC
• NYSE
• FINRA
• Federal Reserve Bank

41.If a firm is more concerned about the quick return of its initial investment than it is about the amount of value created, then the firm is most apt to evaluate a capital project using the _____ method of analysis.

Multiple Choice

• modified internal rate of return
• internal rate of return
• payback
• profitability index
• net present value

42.An investment is acceptable if the payback period:

Multiple Choice

• is negative.
• exceeds the life of the investment.
• is equal to, and only if it is equal to, the investment's life.
• is equal to or greater than some pre-specified period of time.
• is less than some pre-specified period of time.

43.Guggenheim offers a bond with annual payments and a coupon rate of 5 percent. The yield to maturity is 5.62 percent and the maturity date is 9 years away. What is the market price of one $1,000 face value bond?

Multiple Choice

• $942.66
• $868.67
• $1,009.59
• $869.67
• $957.12

44.Which one of these bonds is the most interest-rate sensitive?

Multiple Choice

• 5-year zero coupon bond
• 10-year, 6 percent, semiannual coupon bond
• 10-year zero coupon bond
• 5-year, 6 percent, annual coupon bond
• 10-year, 6 percent, annual coupon bond

45.When a firm commences a positive net present value project, you know:

Multiple Choice

• the present value of the expected cash flows is equal to the project's cost.
• the inherent risks within the project have been ignored.
• that all the projected cash flows will occur as expected.
• the stockholders' value in the firm is expected to increase.
• the project will pay back within the required payback period.

46.Which statement concerning the net present value (NPV) of an investment or a financing project is correct?

Multiple Choice

• A financing project should be accepted if, and only if, the NPV is exactly equal to zero.
• Any type of project with greater total cash inflows than total cash outflows, should always be accepted.
• An investment project that has positive cash flows for every time period after the initial investment should be accepted.
• An investment project should be accepted only if the NPV is equal to the initial cash flow.
• Any type of project should be accepted if the NPV is positive and rejected if it is negative.

47.The payback method of analysis:

Multiple Choice

• considers all project cash flows.
• discounts cash flows.
• has a timing bias.
• applies an industry-standard recoupment period.
• ignores the initial cost.

48.Rosina purchased one 15-year bond at par value when it was initially issued. This bond has a coupon rate of 7 percent and matures 13 years from now. If the current market rate for this type and quality of bond is 7.5 percent, then Rosina should expect:

Multiple Choice

• today's market price to exceed the face value of the bond.
• the bond issuer to increase the amount of all future interest payments.
• to realize a capital loss if she sold the bond at today's market price.
• the current yield today to be less than 7 percent.
• the yield to maturity to remain constant due to the fixed coupon rate.

49.Payback is frequently used to analyze independent projects because:

Multiple Choice

• it is easy and quick to calculate.
• it considers the time value of money.
• it produces better decisions than those made using either NPV or IRR.
• all relevant cash flows are included in the analysis.
• it is the most desirable of all the available analytical methods from a financial perspective.