FINANCE 3325 EXAM #2 D) both A and B of the above. A) more liquidity oney maket
ID: 2786583 • Letter: F
Question
FINANCE 3325 EXAM #2 D) both A and B of the above. A) more liquidity oney maket securities, capital market securities have B) longer maturities. C) lower yields. D) less risk 9) The primary reason thati A) reduce the risk that interest rates will fall before they pay off their debt off their debt individuals and firms choose to borrow long-term is to C) reduce monthly interest term debt instruments. payments, as interest rates erm debt instrumetsret ayments,as interest rates tend to be higher on short-term than D) reduce total interest payments over the life of the debt. 10) Individuals and households frequently purchase capital and houscholds froquenty purchase capital market securities through financial institutions such as A) mutual funds. B) pension funds. C) money market mutual funds. D) all of the above. E) only A and B of the above. 11) Restrictive covenants can A) limit the amount of dividends the firm can pay B) limit the ability of the firm to issue additional debt. C) restrict the ability of the firm to enter into a merger agreement. D) do all of the above. E) do only A and B of the above. 12) 0) Callable bonds usually have a higher yield than comparable noncallable bonds. (II) Convertible bonds are atractive to bondholders and sell for a higher price than comparable nonconvertible bonds. A) (I) is true, (II) false. B) (1) is false, (II) true. C) Both are true. D) Both are false. ield on a $6,000, 10 percent coupon bond selling for $5,000 is A) 5%. B)10%. C)12%. D) 15%. 14) Which of the following is not an o Which of the following is not an objective of the Securities andExplanation / Answer
1. Option B, Longer maturities
2. Option B
3. Option E
4. Option D
5. Option C..Callable bonds provide the issuer a call option hence, the yield is increased by that option value.As convertible bonds are providing the investors a convertibility option, the yield is reduced by that option value and as the price is inversely proportional to yield, price is high
6. Option C..6000*10%/5000=12%
7. Option B
8. Option B..(30+0.24)/1.15=26.30
9. Option D...(37+1)/1.12=33.93
10. Option A..1*(1+10%)/(11%-10%)=110
11. Option B..Higher the dividend value, higher is the stock price
12. Option D..Higher the required return, lower is the stock price
13. =20*1.85=37
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.