Liberty University BUSI 321 test 2 exam complete solutions correct answers A+ work

Liberty University BUSI 321 test 2 exam complete solutions correct answers A+ work

Question 1 Some bonds are "stripped," which means that

Question 2 Which of the following is not an example of a municipal bond?

Question 3 For bonds issued under a _______ arrangement, the underwriter guarantees the issuer that the bonds will be sold at a specified price.

Question 4 (Financial calculator required.) Erin is, a private investor, who can purchase $1,000 par value bonds for $980. The bonds have a 10 percent coupon rate, pay interest annually, and have 20 years remaining until maturity. Erin's yield to maturity is ____ percent.

Question 5 Bonds issued by ____ are backed by the federal government.

Question 6 A call provision on bonds normally

Question 7 Which of the following statements is true regarding STRIPS?

Question 8 Which of the following is not mentioned in your text as a protective covenant?

Question 9 A ten­year, inflation­indexed bond has a par value of $10,000 and a coupon rate of 5 percent. During the first six months since the bond was issued, the inflation rate was 2 percent. Based on this information, the coupon payment after six months will be $____.

Question 10 The ____________ was recently established to identify risks in the U.S. financial system and make regulatory recommendations that could reduce such risks.

Question 11 Assume bond portfolio managers actively manage their portfolios. If they expect interest rates to ____, they would shift toward ____.

Question 12 The bonds that are most sensitive to interest rate movements have

Question 13 Assume a bond with a $1,000 par value and an 11 percent coupon rate, two years remaining to maturity, and a 10 percent yield to maturity. The duration of this bond is ____ years.

Question 14 If the level of inflation is expected to ____, there will be ____ pressure on interest rates and ____ pressure on the required rate of return on bonds.

Question 15 As interest rates consistently rise over a specific period, the market price of a bond you own would likely ____ over this period. (Assume no major change in the bond's default risk.)

Question 16 When the European Central Bank provides credit to a country that is experiencing debt repayment problems, the ECB commonly:

Question 17 Consider a coupon bond that sold at par value two years ago. If interest rates are much lower now than when this bond was issued, the coupon rate of that bond will likely be ____ the prevailing interest rates, and the present value of the bonds will be ____ its par value.

Question 18 Which of the following is not true with respect to a growing­equity mortgage?

Question 19 A(n) _________ problem occurs when a person or institution does not have to bear the full consequence of its behavior and therefore assumes more risk than it otherwise would.

Question 20 Collateralized mortgage obligations (CMOs) are generally perceived to have

Question 21 Use an amortization schedule. A 15­year $100,000 mortgage has a fixed mortgage rate of 9 percent. In the first month, the total mortgage payment is $____, and $____ of this amount represents payment of interest.

Question 22 A mortgage with low initial payments that increase over time without ever leveling off is a

Question 23 Financial institutions that hold fixed­rate mortgages in their asset portfolios are exposed to ____ risk, because they commonly use funds obtained from short­term customer deposits to make long­term mortgage loans.

Question 24 In an amortization schedule of monthly mortgage payments

Question 25 A ____ mortgage allows borrowers to initially make small payments on the mortgage, which are then increased on a graduated basis over the first five to ten years; payments then level off from there on.

Question 26 A firm whose stock price has risen:

Question 27 Firms are more willing to issue new stock in a secondary stock offering when the market price of their outstanding shares is relatively

Question 28 Which of the following is not a form of shareholder activism?

Question 29 Which of the following is not true regarding the Sarbanes­Oxley Act?

Question 30 Assume a firm that is valued at $800 million with 6 million shares of stock outstanding. This firm's stock should have a price of $____ per share.

Question 31 When brokers encourage investors to place bids for IPO shares on the first day that are above the offer price this is referred to as

Question 32 Which of the following is not a provision specified in the Sarbanes­Oxley Act?

Question 33 Which of the following is not a barrier to corporate control?

Question 34 Which of the following statements is incorrect?

Question 35 The general mood of investors represents:

Question 36 ____ is (are) not a firm­specific factor(s) that affect(s) stock prices.

Question 37 Steam Corp. has a beta of 1.5. The prevailing risk­free rate is 5 percent and the annual market return in recent years has been 11 percent. Based on this information, the required rate of return on Steam Corp. stock is ____ percent.

Question 38 If the standard deviation of a stock's returns over the last 12 quarters is 4 percent, and if there is no perceived change in volatility, there is a ____ percent probability that the stock's returns will be within ____ percentage points of the expected outcome.

Question 39 The formula for a stock portfolio's volatility does not contain the

Question 40 Stock X has a lower beta than Stock Y. The market return for next month is expected to be either −1 percent, +1 percent, or +2 percent with an equal probability of each scenario. The probability distribution of Stock X returns for next month is

Question 41 The January effect refers to the ____ pressure on ____ stocks in January of every year.

Question 42 Sorvino Co. is expected to offer a dividend of $3.2 per share per year forever. The required rate of return on Sorvino stock is 13 percent. Thus, the price of a share of Sorvino stock, according to the dividend discount model, is $____.

Question 43 Short­selling a stock refers to

Question 44 Lisa would like to purchase a stock priced at $70. The stock is not expected to pay any dividends in the coming year. She can either put up the entire amount and purchase the stock, or borrow $35 from her brokerage firm at an annual interest rate of 12 percent and put up the remainder. She thinks she can sell the stock for $100 after one year. If she borrows from her brokerage firm, her estimated return on the stock would be ____ percent.

Question 45 Which of the following statements is incorrect with respect to the structure of the SEC?

Question 46 Karen just purchased a stock costing $33 on margin, paying $23 and borrowing the remainder from a brokerage firm at 15 percent annual interest. The stock pays an annual dividend of $2. If Karen sells the stock after one year at a price of $50, what is the return on the stock?

Question 47 The Division of ____ of the SEC regulates the fair and orderly disclosure trading by ensuring honest practices by various organizations that facilitate the trading of securities.

Question 48 When investors buy stock with borrowed funds, this is sometimes referred to as

Question 49 Assume a stock is initially priced at $50, and pays an annual $2 dividend. An investor uses cash to pay $25 a share and borrows the remaining funds at a 12 percent annual interest. What is the return if the investor sells the stock for $55 at the end of one year?

Question 50 The risk of a short sale is that the stock price