Question Details

FINANCE QUIZ
Question 1 		
 	If you expect NoDiv Corporation to sell for $75 per share in three years while paying no dividends along the way, if your required rate of return is 16% per year, how much is the stock worth today? 				
	 
 
	$42.68 
 
	$48.05 
 
	$51.10 
 
	$74.64 
				
   Question 2 		
 	A compound annuity involves depositing or investing a single sum of money and allowing it to compound for a certain number of years. 				
	 
 
True
 
False
				
   Question 3 		
 	A mortgage bond is secured by a lien on real property. 				
	 
 
True
 
False
				
   Question 4 		
 	Perpetuity is an investment that continues forever but pays a different dollar amount each year. 				
	 
 
True
 
False
				
   Question 5 		
 	The required rate of return for an asset is equal to the risk-free rate plus a risk premium. 				
	 
 
True
 
False





	
				
   Question 6 		
 	The T-bill return is used in the CAPM model as the risk free rate. 				
	 
 
True
 
False
				
   Question 7 		
 	The present value of a future sum of money increases as the number of years before the payment is received increases. 				
	 
 
True
 
False
				
   Question 8 		
 	Yanti Corp. preferred stock has a 5% stated dividend percentage, and a $100 par value. What is the value of the stock if your required rate of return is 6% per year? 				
	 
 
	$83.33 
 
	$100 
 
	$120 
 
	$3,000 
				
   Question 9 		
 	Which of the following statements is true? 				
	 
 
	The value of a bond is inversely related to changes in investors' present required rate of return. 
 
	If interest rates decrease, the value of a bond will decrease. 
 
	If interest rates increase, the value of a bond will increase. 
 
	None of the above. 
				
   Question 10 		
 	If a bond sells for its par value, the coupon interest rate and yield to maturity are equal. 				
	 
 
True
 
False


	
				
   Question 11 		
 	The restrictive provisions contained in the bond indenture protect the common stockholders. 				
	 
 
True
 
False
				
   Question 12 		
 	Which of the following is the slope of the security market line? 				
	 
 
	security market line
 
	one 
 
	it varies depending on risk 
 
	beta
				
   Question 13 		
 	The expected rate of return on a share of common stock whose dividends are growing at a constant rate (g) is which of the following, where D1 is the next dividend and Vc is the current value of the stock? 				
	 
 
	(D1 + g)/Vc 
 
	D1/Vc 
 
	D1/g 
 
	none of the above 
				
   Question 14 		
 	The value of a bond investment, which provides fixed interest payments, will increase when discounted at a 12% rate rather than at a 7% rate. 				
	 
 
True
 
False
				
   Question 15 		
 	The Elvisalive Corporation, makers of Elvis memorabilia, has a beta of 2.75. The return on the market portfolio is 14% and the risk free rate is 4%. According to CAPM, what is the required rate of return on Elvisalive stock? 				
	  
	27.5% 
 
	31.5% 
 
	11% 
 
	10%