A bond\'s value is equal to its _____. Answer FV ( future interest cash flows an
ID: 2706324 • Letter: A
Question
A bond's value is equal to its _____.
Answer
FV ( future interest cash flows and future par payment)
PV(past interest cash flows and future par payment)
PV (future interest payment and future par payment)
Given: kD = required return an investor must earn to buy a bond.
The relationship of bond value to kD is: Bond Value = function of ( ____ ).
Answer
kD
1 / kD
kD*2
A call provision _____ be advantageous to a bond issuer when interest rates ______.
Answer
could; rise
could not; rise
could; fall
could not; fall
A company's Capital Structure is the mix of ___.
Answer
all Assets and Liabilities
all Assets
its Long-Term Debt and Equity financing
all Liabilities
To calculate the interest payment in dollars a bond will pay the owner each year, you would _____.
Answer
multiply the YTM by the bond price
divide the YTC by the call price
divide Rd by coupon
multiply coupon by par value
any of the above
Bond valuation depends on all but _____.
Answer
the amount of cash flows received
the maturity of the loan (bond)
the investor's required rate of return
the dividend payout ratio
The WACC is the ____ to ensure _____.
Answer
maximum required rate of return; creditors and owners receive the return they want
normal return; an expected return to creditors and owners
minimum required rate of return; creditors and owners receive the return they require
either a or c
The risk free rate increases. This would cause the cost of debt to ____ and the cost of equity to ____.
Answer
rise; rise
rise; fall
fall; rise
fall; fall
The expected inflation that would affect a bond or stock would be included in the _____.
Answer
coupon interest payments
dividends
required rate of return an investor must receive to buy the bond or stock
Which of the following does not affect the value of a share of common stock?
Answer
expected dividend in the future
growth rate of dividends
investor's required rate of return
stock's par or stated value
If everything else is assumed constant, as the investor's required rate of return decreases, the value of a security _____.
Answer
stays the same
increases
decreases
has no relation to the investor's required rate of return
FV ( future interest cash flows and future par payment)
PV(past interest cash flows and future par payment)
PV (future interest payment and future par payment)
Given: kD = required return an investor must earn to buy a bond.
The relationship of bond value to kD is: Bond Value = function of ( ____ ).
Answer
kD
1 / kD
kD*2
A call provision _____ be advantageous to a bond issuer when interest rates ______.
Answer
could; rise
could not; rise
could; fall
could not; fall
A company's Capital Structure is the mix of ___.
Answer
all Assets and Liabilities
all Assets
its Long-Term Debt and Equity financing
all Liabilities
To calculate the interest payment in dollars a bond will pay the owner each year, you would _____.
Answer
multiply the YTM by the bond price
divide the YTC by the call price
divide Rd by coupon
multiply coupon by par value
any of the above
Bond valuation depends on all but _____.
Answer
the amount of cash flows received
the maturity of the loan (bond)
the investor's required rate of return
the dividend payout ratio
The WACC is the ____ to ensure _____.
Answer
maximum required rate of return; creditors and owners receive the return they want
normal return; an expected return to creditors and owners
minimum required rate of return; creditors and owners receive the return they require
either a or c
The risk free rate increases. This would cause the cost of debt to ____ and the cost of equity to ____.
Answer
rise; rise
rise; fall
fall; rise
fall; fall
The expected inflation that would affect a bond or stock would be included in the _____.
Answer
coupon interest payments
dividends
required rate of return an investor must receive to buy the bond or stock
Which of the following does not affect the value of a share of common stock?
Answer
expected dividend in the future
growth rate of dividends
investor's required rate of return
stock's par or stated value
If everything else is assumed constant, as the investor's required rate of return decreases, the value of a security _____.
Answer
stays the same
increases
decreases
has no relation to the investor's required rate of return
Explanation / Answer
1. 1/KD
2. could, fall
3. its Long-Term Debt and Equity financing
4. multiply the YTM by the bond price
5. the dividend payout ratio
6. minimum required rate of return; creditors and owners receive the return they require
7. rise;rise
8. required rate of return an investor must receive to buy the bond or stock
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