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Which one of these is a negative covenant that might be found in a bond indenture? A. The company shall maintain a cash surplus of

Which one of these is a negative covenant that might be found in a bond indenture?

  • A. The company shall maintain a cash surplus of $100,000 at all times.
  • B. The company cannot lease any major assets without bondholder approval.
  • C. The company shall provide audited financial statements in a timely manner.
  • D. The company shall maintain a current ratio of 1.1 or higher.
  • E. The company must maintain the loan collateral in good working order.

Which statement is correct?

  • A. An underpriced security will plot below the security market line.
  • B. A security with a beta of 1.54 will plot on the security market line if it is correctly priced.
  • C. A security with a beta of .99 will plot above the security market line if it is correctly priced.
  • D. A portfolio with a beta of .93 will plot to the right of the overall market.
  • E. A risk-free security will plot at the origin.

Which one of the following will occur when the internal rate of return equals the required return?

  • A. The average accounting return will equal 1.0.
  • B. The profitability index will equal 0.
  • C. The net present value will equal the initial cash outflow.
  • D. The profitability index will equal 1.0.
  • E. The profitability index will equal the average accounting return.

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