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FIN 6100 exam 1 Questions With Complete Solutions., Exams of Nursing

Southern Utah University (SUU)Nursing

FIN 6100 exam 1 Questions With Complete Solutions.

Typology: Exams

2024/2025

Available from 07/04/2025

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FIN 6100 exam 1 Questions With Complete Solutions
A bond has a call provision. The call provision allows the
_________ to _________ the bonds before maturity Correct
Answers issuer; call in
A bond that makes no coupon payments and is initially priced at
a deep discount is called a _____ bond. Correct Answers zero
coupon
A stock with a beta of zero would be expected to Correct
Answers have a rate of return equal to the risk-free rate
According to trade-off theory, which is true Correct Answers
Firms take on debt to take advantage of tax shields created by
interest payments on debt
Adverse selection Correct Answers the problem of incomplete
information - of choosing alternatives without fully knowing the
details of available options
All else constant, a bond will sell at _____ when the coupon rate
is _____ the yield to maturity. Correct Answers a discount; less
than
All else constant, a bond will sell at ______ when the yield to
maturity is _____ the coupon rate Correct Answers discount;
higher than
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FIN 6100 exam 1 Questions With Complete Solutions A bond has a call provision. The call provision allows the _________ to _________ the bonds before maturity Correct Answers issuer; call in A bond that makes no coupon payments and is initially priced at a deep discount is called a _____ bond. Correct Answers zero coupon A stock with a beta of zero would be expected to Correct Answers have a rate of return equal to the risk-free rate According to trade-off theory, which is true Correct Answers Firms take on debt to take advantage of tax shields created by interest payments on debt Adverse selection Correct Answers the problem of incomplete information - of choosing alternatives without fully knowing the details of available options All else constant, a bond will sell at _____ when the coupon rate is _____ the yield to maturity. Correct Answers a discount; less than All else constant, a bond will sell at ______ when the yield to maturity is _____ the coupon rate Correct Answers discount; higher than

An agreement giving the bond issuer the option to repurchase the bond at a specified price prior to maturity is the Correct Answers call provision annual coupon payment divided by market price of bond is Correct Answers current yield Bet measure indicates Correct Answers the change in the rate of return on an investment for a given change in the market return Beta Correct Answers βA = ρA,MσA / σM Beta is a measure of Correct Answers market risk Beta levered formula Correct Answers BU * (1+(1-effective tax rate)*(D/E Ratio) Beta of the market portfolio is Correct Answers + Beta of treasury bills portfolio is Correct Answers 0 Beta Unlevered formula Correct Answers βU = βL / [1 + (1 - T)(D/E)] Bonds below BBB or Baa are called Correct Answers junk bonds CAPM ROE Correct Answers Ke = RF + βi [ E(RM) - RF ]

Debt ratings issued by companies such as Moody's and Standard and Poor's depend on Correct Answers the probability of firm default and protection given in the indenture in case of default Debt: Correct Answers as firms increase debt in capital structure, beta must increase which will make the required return on equity increase Effective Tax Rate Correct Answers Income Tax Expense / Pretax Income Expected Rate of Return Correct Answers (Dividend/P0)+(P1- P0/P0) Floating rate bonds are bonds with Correct Answers floating coupon rates tied to an interest rate index For a levered firm, Correct Answers as EBIT increases, EPS increases by a larger percentage. Fundamental cost of equity Correct Answers dividend yield + expected rate of growth in dividends fundamental dividend growth rate is Correct Answers plow back rate * ROE If a bond was issued at par, the quoted price of the bond will not necessarily equal the par value of the bond after issuance because Correct Answers market interest rates have changes and or interest have accrued

If its yield to maturity is less than its coupon rate, a bond will sell at a _____, and increases in market interest rates will _____ Correct Answers premium; decrease this premium Interest coverage ratio Correct Answers EBIT/ interest expense Inventory Turnover Correct Answers COGS/Average Inventory Inventory Turnover Ratio Correct Answers cost of goods sold/average inventory Market to Book Ratio Correct Answers market value per share/book value per share Maximum diversification is obtained by combining two stocks with a correl. coefficient equal to Correct Answers - Modigliani and Miller's Proposition I states that Correct Answers the market value of any firm is independent of its capital structure Moral hazard Correct Answers When the act of insuring an event increases the likelihood that the event will happen Not a component of interest rate Correct Answers fed funds rate Not a responsibility of BoD Correct Answers Deciding on new promotional campaign

Sustainable growth rate Correct Answers g = (1 - payout ratio)

  • ROE T/F According to Proposition II, the cost of equity increases as more debt is issued, but the weighted average cost of capital remains unchanged Correct Answers True T/F Financial leverage affects the risk of the firm's assets Correct Answers False T/F Financial leverage affects the risk of the firm's common stock Correct Answers True T/F Financial leverage increases the expected return and risk of the shareholder Correct Answers True the ______ premium is that portion of a nominal interest rate or bond yield that represents compensation for the possibility of nonpayment by the bond issuer Correct Answers default risk The beta is a measure of Correct Answers market risk The call policy that maximizes shareholder wealth is to call a bond issue when the Correct Answers bond's price equals or exceeds the call price The CAPM states that Correct Answers the expected risk premium on an investment is proportion to beta The correlation meausres the Correct Answers direction of movement between the returns of two stocks

The efficient portfolios Correct Answers provide highest returns for a given level of risk and provide least risk for a given level of returns The pecking order theory of capital structure implies that Correct Answers Firms prefer internal finance and debt to equity when external financing is required The portion of the risk that can be eliminated by diversification is called Correct Answers firm specified risk The principal amount of a bond that is repaid at the end of the loan term is called the bond's: Correct Answers Face value The trade-off theory of capital structure predicts that Correct Answers safe firms should borrow more than risky ones The written agreement between a corporation and the bondholder's representative is called the Correct Answers indenture Times Interest Earned Correct Answers EBIT/ interest expense Total Asset Turnover Correct Answers Sales/Total Assets Total capitalization is defined as Correct Answers total long- term liabilities plus stockholders' equity Total Debt Per Share Correct Answers Total Debt/(shares outstanding*price)

Which refers to date on which a shareholder must be listed as the owner of a share in order to receive a declared dividend Correct Answers date of record Which theory suggests a firm borrow money in order to limit cash available for managers to waste obtaining private benefits Correct Answers agency theory Which type of repurchase allows management to declare an intention to buy back a set dollar amount of stock over a set period, but not legally obligate them to actually buy back the shares Correct Answers open market repurchase Which would increase the credit spread on a bond Correct Answers a decrease in a company's bond rating Which would you find in a bond's indenture Correct Answers coupon rate