True or False ______ 26) Debentures are an important source of short-term funds

Question

True or False ______ 26) Debentures are an important source of short-term funds for smaller businesses. ______ 27) You will receive $5,000 at the end of 5 years and the rate on comparable investments is 7%. To find the value of that sum today you should use the present value of an annuity table. ______ 28 Within the capital asset pricing model, the higher the beta the lower the required rate of return. ______ 29) If you would like less risk with an investment, you should buy stocks with betas greater than 1.0 ______ 30) The difference between the cost of capital and the risk-free return in the Capital Asset Pricing Model (CAPM) is known as the market differential. _____ 31) A disadvantage of the payback method is that it does not consider which investment is the most profitable. _____ 32) A quick ratio considerably smaller than the current ratio indicates the firm will have a higher return on assets. _____ 33) An increasing average collection period indicates the firm is generating more income. _____ 34) If you put $1,000 in the bank every year at 6% interest for the next ten years, you would use the future value of an annuity table to find the ending balance in your account. _____ 35) The higher the bond rating (for example from Moodys or Standard & Poors), then the higher the interest rate on the bond. _____ 36) The term debenture refers to the after-tax value of an investment. _____ 37) The stated coupon rate on the bond is considered to be the most accurate measure for determining the return on a bond. _____ 38) A call provision in the bond agreement allows the bondholder to redeem the bond before the maturity date at his / her choosing. _____ 39) Zero-coupon bonds often allow the firm to decrease the required rate of return on the investment. _____ 40) Commercial paper is short-term with one or two years maximum for maturity. -------------------------------------------------------------------------------------------------------------------------- Thank you for taking and the course and God Bless!!

Explanation / Answer

26) Debentures are an important source of short-term funds for smaller businesses. FALSE

27) You will receive $5,000 at the end of 5 years and the rate on comparable investments is 7%. To find the value of that sum today you should use the present value of an annuity table. FALSE

28 Within the capital asset pricing model, the higher the beta the lower the required rate of return. FALSE

29) If you would like less risk with an investment, you should buy stocks with betas greater than 1.0 _FALSE

30) The difference between the cost of capital and the risk-free return in the Capital Asset Pricing Model (CAPM) is known as the market differential. _TRUE

31) A disadvantage of the payback method is that it does not consider which investment is the most profitable. FALSE

32) A quick ratio considerably smaller than the current ratio indicates the firm will have a higher return on assets. FALSE

34) If you put $1,000 in the bank every year at 6% interest for the next ten years, you would use the future value of an annuity table to find the ending balance in your account. FALSE

35) The higher the bond rating (for example from Moodys or Standard & Poors), then the higher the interest rate on the bond.FALSE

36) The term debenture refers to the after-tax value of an investment. FALSE

37) The stated coupon rate on the bond is considered to be the most accurate measure for determining the return on a bond.FALSE

38) A call provision in the bond agreement allows the bondholder to redeem the bond before the maturity date at his / her choosing. TRUE

39) Zero-coupon bonds often allow the firm to decrease the required rate of return on the investment.FALSE

40) Commercial paper is short-term with one or two years maximum for maturity.TRUE

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