FIN 3310 Summer I1 2018 Chapter 7&8 Concepts DUIE: 07/31/2018 in class, content
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FIN 3310 Summer I1 2018 Chapter 7&8 Concepts DUIE: 07/31/2018 in class, content will be covered Monday stock is defined by the fact that it receives no preferential treatment in respect to cither dividends or bankruptey proceedings. ACCCtock as a fixed dividend and a priority status over other equity securitics, but carries no vot 2. The capital gain yicld could be treated as the rate at which Dealers keep/ does not keep their own stock inventories while Brokers keep/ does not keep their n stock inventories. (Circle the one that is correct) increasc in current value of stock will decrease. (Put: R, D and g into the corree oradecrease in or an 4. According to dividend growth model, an increase in CO would increase the current valuc of stock, while the opposite happens, the 5. You own one share of a cumulative preferred stock that pays quarterly dividends, The firm has l, this quarter. As a preferred sharcholder, you should expect to receive the equivalent t placc.) recently suffered some financial setbacks and has failed to pay the last two dividends. However, new funding has been arranged and the firm intends to restore all dividends, both common and preferred of quarter(s) of dividends when the next dividend is paid 6. One-year ahead EPSI, with last year EPSO and group rate of g, is calculated 7. A bond's coupon rate is equal to annual interest (2 + semi-annual coupon p OJ nent mi kei Pnut. The day a bond repay the principal (face value) is called 8. A bond that has only one payment (payment type pure-discount loan), which occurs at maturity bond, for the kind of bond, the interest investor earn is th defines difference between and e fisher effect is defined as the relationship among Kea mor 10. All else being equal, bond with long/ short TTM and high/low coupon rate will be mostly er interest rate risk (Circle the answer) affected by interest rate change, which mean high 11. The term structure of interest is plot 2. Circle: against When the coupon rate > yield, the bond sell at par/ at discount/ at premium When the coupon rate yield, the bond sell at par/ at discount/ at premium. When the coupon rateExplanation / Answer
4) According to dividend growth model, an increase in Return or a decrease in Dividend or an increase in Growth would increase the current value of stock.
7) The day a bond repay the principal is called Maturity.
8) A bond that has only one payment which occurs at maturity defines Zero Coupon Bond , for the kind of bond, the interest investor earn is called difference between Redeemption Value and Face Value
12) When the Coupon rate = Yield , Bond sells at par
When the Coupon rate > Yield , Bond sells at discount
When the Coupon rate < Yield , Bond sells at premium.
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