Fin 413 Exam 1 Questions With Complete Solutions
_________ firms can borrow commercial paper for ________
rates than traditional loans
a. low quality; lower
b. low quality; higher
c. high quality; higher
d. high quality; lower Correct Answers d
a corporate bond contractually obligates the corporation to:
Correct Answers pay periodic coupon payments
repay principal at maturity
a typical mortgage issuer is: Correct Answers individual/very
small company
all else equal, what happens to pv if interest rate increases?
a. pv increases
b. pv decreases
c. all of the above
d. none of the above Correct Answers b
all else equal, what happens to pv if investment horizon
increases?
a. pv increases
b. pv decreases
c. all of the above
d. none of the above Correct Answers b
alt a mortgage Correct Answers higher credit risk than
conventional mortgage, but lower risk than subprime
,annual coupon= Correct Answers coupon rate x face value
ask price Correct Answers price seller asks for (price investor
buys at)
auctions are announced _______ in advance:
a. several months
b. several years
c. several hours
d. several days
e. none of the above Correct Answers d
balloon payments Correct Answers fixed monthly interest
payment then full payment of principal
banker's acceptance Correct Answers a written order for a bank
to pay a third party a stated amount of money on a specific date
bid price Correct Answers price bond trader buys at (price
investor sells at)
bond equivalent yields use (360/365)-days years Correct
Answers 365
bond price= Correct Answers pv of coupon payments + pv of
face value
bonds are typically issued by: Correct Answers very large
companies/gov't
, bonds are usually issued by Correct Answers investment banks
bonds with rating lower than BBB are called: Correct Answers
junk bonds
bonds:
a. investors lend money to a firm
b. firm lends money to investors
c. none of the above
d. all of the above Correct Answers a
borrowers cannot borrow _______% of property value:
a. 35%
b. 50%
c. 75%
d. 100%
e. none of the above Correct Answers d
borrowing banks (do/do not) pledge collateral for fed funds
Correct Answers do not
bullet bonds Correct Answers bonds that are non-callable for
the issue's life
call price Correct Answers price issuer pay to retire the bond
call price is also called: Correct Answers regular price
general redemption price
_________ firms can borrow commercial paper for ________
rates than traditional loans
a. low quality; lower
b. low quality; higher
c. high quality; higher
d. high quality; lower Correct Answers d
a corporate bond contractually obligates the corporation to:
Correct Answers pay periodic coupon payments
repay principal at maturity
a typical mortgage issuer is: Correct Answers individual/very
small company
all else equal, what happens to pv if interest rate increases?
a. pv increases
b. pv decreases
c. all of the above
d. none of the above Correct Answers b
all else equal, what happens to pv if investment horizon
increases?
a. pv increases
b. pv decreases
c. all of the above
d. none of the above Correct Answers b
alt a mortgage Correct Answers higher credit risk than
conventional mortgage, but lower risk than subprime
,annual coupon= Correct Answers coupon rate x face value
ask price Correct Answers price seller asks for (price investor
buys at)
auctions are announced _______ in advance:
a. several months
b. several years
c. several hours
d. several days
e. none of the above Correct Answers d
balloon payments Correct Answers fixed monthly interest
payment then full payment of principal
banker's acceptance Correct Answers a written order for a bank
to pay a third party a stated amount of money on a specific date
bid price Correct Answers price bond trader buys at (price
investor sells at)
bond equivalent yields use (360/365)-days years Correct
Answers 365
bond price= Correct Answers pv of coupon payments + pv of
face value
bonds are typically issued by: Correct Answers very large
companies/gov't
, bonds are usually issued by Correct Answers investment banks
bonds with rating lower than BBB are called: Correct Answers
junk bonds
bonds:
a. investors lend money to a firm
b. firm lends money to investors
c. none of the above
d. all of the above Correct Answers a
borrowers cannot borrow _______% of property value:
a. 35%
b. 50%
c. 75%
d. 100%
e. none of the above Correct Answers d
borrowing banks (do/do not) pledge collateral for fed funds
Correct Answers do not
bullet bonds Correct Answers bonds that are non-callable for
the issue's life
call price Correct Answers price issuer pay to retire the bond
call price is also called: Correct Answers regular price
general redemption price
