The longer the time to maturity:

the greater the price increase from a decrease in rates

In a general sense, the value of any asset is the

present value of the cash flows received from the asset

Stock valuation models are dependent upon

expected dividends, dividend growth and discount rate

Preferred stock has all but which of the following characteristics?

the same binding contractual obligation as debt

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BAC 300 Chapter 10

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Valuation & Rates of Return

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Questions 10

Answers

1
The longer the time to maturity:
the greater the price increase from a decrease in rates
the less the price decrease from a decrease in rates
the greater the price increase from an increase in rates
the less the price increase from an increase in rates
2
If stock price (Po) goes up, and nothing else changes, Ke (the required rate of return) should
remain unchanged
need more information
go down
go up
3
In a general sense, the value of any asset is the
present value of the cash flows received from the asset
future value of earnings discounted by cost of capital
value of the dividends received from the asset
value of past dividends and price increases for the asset
4
A bond which has a yield to maturity greater than its coupon rate will sell for a price
at par
equal to face value of bond plus the interest payments
above par
below par
5
If the inflation premium for a bond goes up, the price of the bond
goes up
need more information
goes down
is unaffected
6
Based on risk - which of these will have the highest rate of return?
corporate bond
Treasury bill
Certificate of Deposit
common stock
7
Stock valuation models are dependent upon
past dividends, flotation costs and bond yields
expected dividends, dividend growth and discount rate
Past dividends, past growth and appropriate discount rate
all of the above
8
What is the Market Value of this bond?
Over $1,000
Over $1,200
Not enough information to tell
Under $1,000
9
Preferred stock has all but which of the following characteristics?
no stated maturity
the same binding contractual obligation as debt
a dividend that carries a higher priority than common stock
preferred lacks the ownership privilege of common stock
10
This is not one of the components that makes up the required rate of return on a bond?
risk premium
maturity payment
real rate of return
inflation premium

BAC 300 Chapter 10 Flashcards | StudBud