1. (TCO 3) Which one of the following will increase the future value of a lump s

Question

1. (TCO 3) Which one of the following will increase the future value of a lump sum invested today? (Points : 3)       decreasing the amount of the lump sum
      increasing the rate of interest
      paying simple interest rather than compound interest
      paying interest only at the end of the investment period
      shortening the investment time period

2. (TCO 3) The difference between an ordinary annuity and an annuity due is the: (Points : 3)       number of payments to be made
      amount to be paid each time
      the timing of the payments
      frequency of the payments
      interest rate applied to the first payment

3. (TCO 3) Fanta Cola has $1,000 par value bonds outstanding at 12 percent interest. The bonds mature in 25 years. What is the current price of the bond if the YTM is 11 percent? Assume annual payments. (Points : 3)       $1080
      $1085
      $925
      $1000

4. (TCO 6 and 8) A bond's debenture will include which of the following? (Points : 3)       description of any loan collateral
      call provisions
      total amount of the bond issue
      protective covenants
      all of the above
      none of the above

5. (TCO 3) Bonds issued by Blue Sky Airlines have a face value of $1,000 and currently sell for $1,180. The annual coupon payments are $125. If the bonds have 20 years until maturity, what is the approximate YTM of the bonds? (Points : 3)       10.50%
      11.50%
      11.75%
      12%

6. (TCO 3) Bean Coffee issued preferred stock many years ago. It carries a dividend of $8 per share, fixed. As time has passed, yields have decreased from the original eight percent (at the time of issuance) to six percent. What was the original issue price? Hint: Yield is the same as required rate of return. (Points : 3)       $100
      $400
      $7.40
      $86.40
      None of the above

7. (TCO 3) Intelligence Research, Inc. will pay a common stock dividend of $1.60 at the end of the year. The required rate of return by common stockholders is 13 percent. The firm has a constant growth rate of seven percent. What is the current price of the stock? (Points : 3)       $23
      $32
      $27
      $29

8. (TCO 3) Royal Electric paid a $2 dividend last year. The dividend is expected to grow at a constant rate of five percent over the next three years. Common stockholders require a 12 percent return. What are the values of the dividends for years 1, 2 and 3, respectively? (Points : 3)       $2, $2.10 and $2.205
      $2, $2.205 and $2.315
      $2.10, $2.205, and $2.315
      $2.10, $2.205 and $2.456

9. (TCO 6) Which of the following is true regarding the primary market? (Points : 3)       it is the market where the largest number of shares are traded on a daily basis.
      it is the market in which the largest number of issues are listed.
      it is the market with the largest number of participants.
      it is the market where new securities are offered.
      it is the market where shareholders trade most frequently with each other.

10. (TCO 6) The smallest firms listed on NASDAQ are in the NASDAQ _____ Market. (Points : 3)       National
      Capital
      Regional
      Global Select
      Global

11. (TCO 6) The maturity date of a bond is defined as: (Points : 3)       the first date on which a bond can be called.
      the date on which the principal amount is paid.
      20 years after the issue date.
      the date on which the next interest payment will be made.
      the original issue date.

12. (TCO 6) Star Industries has one outstanding bond issue. An indenture provision prohibits the firm from redeeming the bonds during the first two years. This provision is referred to as a _____ provision. (Points : 3)       deferred call
      market
      liquidity
      debenture
      sinking fund

13. (TCO 8) Which of the following is true regarding bonds? (Points : 3)       Bonds do not carry default risk.
      Bonds are not sensitive to changes in the interest rates.
      Moody%u2019s and Standard and Poor%u2019s provide information regarding a bond%u2019s interest rate risk.
      Municipal bonds are not free of default risk.
      None of the above is true

14. (TCO 6) Which of the following best describes a zero-coupon bond? (Points : 3)       A bond that adjusts the coupon payments based on an interest rate index, such as the T-bill.
      A bond that is issued by the U.S. government.
      A bond that adjusts the coupon payment date.
      A bond that has no coupons and pays a face value at maturity.
      An EE Savings Bond

15. (TCO 6) Which of the following are not true regarding convertible bonds? Select all that apply: (Points : 3)        Are extremely rare
       Can be exchanged for a fixed number of shares at maturity only  
       Can be exchanged for a fixed number of shares before maturity
       Allow the holder to require the issuer to buy the bond back
1. (TCO 1) Kate is the owner of Kate's Sun Wear, which is a sole proprietorship. Kate unexpectedly suffered a fatal heart attack. Which one of the following statements is correct given this situation? (Points : 3)       The proprietorship ended when Kate passed away.
      Kate's Sun Wear will continue on with Kate's beneficiary automatically replacing Kate as the sole proprietor.
      The proprietorship ends when Kate passed on, and all income to that date will be tax-free.
      The proprietorship ends when Kate passed on, and all income to that date will be taxed as a separate legal entity.
      The proprietorship ends when Kate passed on, and all income earned to that date will be taxed as Kate's personal income.

2. (TCO 1) Trademarks are classified as: (Points : 3)       short-term assets.
      current liabilities.
      long-term debt.
      tangible fixed assets.
      intangible fixed assets.
1. (TCO 3) Which one of the following will increase the future value of a lump sum invested today? (Points : 3)       decreasing the amount of the lump sum
      increasing the rate of interest
      paying simple interest rather than compound interest
      paying interest only at the end of the investment period
      shortening the investment time period

Explanation / Answer

1= paying simple interest rather than compound interest

2= the timing of the payments

3=$1085

4=protective covenants

5=12%

6=$86.40

7=29$

8=$2.10, $2.205, and $2.315

9= it is the market in which the largest number of issues are listed

10=Regional

11= the date on which the next interest payment will be made

12=     debenture

13=None of the above is true

14= A bond that has no coupons and pays a face value at maturity.

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