Link: Bonds Tied to Del Debt Sold


  • moon

    In which of the following situations you can expect multiple answers of IRR?
    1. Why net present value is the most important criteria for selecting the project in capital budgeting?
    a. Because it has a direct link with the shareholders dividends maximization
    b. Because it helps in quick judgment regarding the investment in real assets
    c. Because we have a simple formula to calculate the cash flows
    d. Because it has direct link with shareholders wealth maximization

    2. In which of the following situations you can expect multiple answers of IRR?
    a. More than one sign change taking place in cash flow diagram
    b. There are two adjacent arrows one of them is downward pointing & the other one is upward pointing
    c. During the life of project if you have any net cash outflow
    d. All of the given options

    3. Which one of the following selects the combination of investment proposals that will provide the greatest increase in the value of the firm within the budget ceiling constraint?
    a. Cash budgeting
    b. Capital budgeting
    c. Capital expenditure
    d. Capital rationing

    4. Who is responsible for the decisions relating capital budgeting and capital rationing?
    a. Chief executive officer
    b. Junior management
    c. Division heads
    d. All of the given option

    5. What is a legal agreement, also called the deed of trust, between the corporation issuing bonds and the bondholders that establish the terms of the bond issue?
    a. Indenture
    b. Debenture
    c. Bond
    d. Bond trustee

    6. __________ is a high-risk, high-yield bond rated below investment grade; while a/ (an) __________ bond has its interest payment contingent on sufficient earnings of the firm.
    a. A junk bond; income
    b. A subordinated debenture; mortgage
    c. A debenture; subordinated debenture
    d. An income bond; mortgage

    7. __________ is a long-term, unsecured debt instrument with a lower claim on assets and income than other classes of debt; while a/(an) __________ bond issue is secured by the issuer’s property.
    a. A subordinated debenture; mortgage
    b. A debenture; subordinated debenture
    c. A junk bond; income
    d. An income bond; junk

    8. The value of the bond is NOT directly tied to the value of which of the following assets?
    a. Liquid assets of the business
    b. Fixed assets of the business
    c. Lon term assets of the business
    d. Real assets of the business

    9. The value of a bond is directly derived from which of the following?
    a. Cash flows
    b. Coupon receipts
    c. Par recovery at maturity
    d. All of the given options

    10. Which of the following is not the present value of the bond?
    a. Intrinsic value
    b. Fair price
    c. Theoretical price
    d. Market price

    11. The current yield on a bond is equal to ________.
    a. The yield to maturity
    b. Annual interest divided by the par value
    c. Annual interest divided by the current market price
    d. The internal rate of return

    12. A coupon bond pays annual interest, has a par value of Rs.1,000 matures in 4 years, has a coupon rate of 10%, and has a yield to maturity of 12%. What is the current yield on this bond is?
    a. 10.45%
    b. 10.95%
    c. 10.65%
    d. 10.52%

    13. Which of the following is a characteristic of a coupon bond?
    a. Does not pay interest on a regular basis but pays a lump sum at maturity
    b. Can always be converted into a specific number of shares of common stock in the issuing company
    c. Pays interest on a regular basis (typically every six months)
    d. Always sells at par

    14. Which of the following value of the shares changes with investor’s perception about the company’s future and supply and demand situation? (Comprehension)
    a. Par value
    b. Intrinsic value
    c. Market value
    d. Face value

    15. The value of direct claim security is derived from which of the following?
    a. Fundamental analysis
    b. Underlying real asset
    c. Supply and demand of securities in the market
    d. All of the given options

    16. _________ is equal to (common shareholders’ equity/common shares outstanding).
    a. Liquidation value per share
    b. Book value per share
    c. Market value per share
    d. None of the above

    17. Low Tech Company has an expected ROE of 10%. The dividend growth rate will be ________ if the firm follows a policy of paying 40% of earnings in the form of dividends.
    a. 4.8%
    b. 6.0%
    c. 7.2%
    d. 3.0%

    18. High Tech Chip Company is expected to have EPS in the coming year of Rs. 2.50. The expected ROE is 12.5%. An appropriate required return on the stock is 11%. If the firm has a plowback ratio of 70%, what would be the growth rate of dividends?
    a. 6.25%
    b. 8.75%
    c. 6.60%
    d. 7.50%

    19. In the dividend discount model, _______ which of the following are NOT incorporated into the discount rate?
    a. Real risk-free rate
    b. Risk premium for stocks
    c. Return on assets
    d. Expected inflation rate

    20. Bond is a type of Direct Claim Security whose value is NOT secured by __________.
    a. Tangible assets
    b. Fixed assets
    c. Intangible assets
    d. Real assets

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