Which one of the following is the rate of return an investor earns on a bond before
adjusting for inflation?
A. Nominal rate
B. Real rate
C. Dirty rate
D. Coupon rate
E. Clean rate
Trendsetters has a cost of equity of 18.1 percent. The market risk premium is 10.2
percent and the risk-free rate is 4.4 percent. The company is acquiring a competitor,
which will increase the companys beta to 1.6. What effect, if any, will the acquisition
have on the firms cost of equity capital?
A. No effect
B. Decrease of 2.62 percent
C. Decrease of 0.84 percent
D. Increase of 2.62 percent
E. Increase of 4.13 percent
Which of the following are money market securities?I. Jumbo CDsII. Short-term
municipal debtIII. U.S. Treasury billsIV. Commercial paper
A. I and IV only
B. II and III only
C. I, II, and IV only
D. II, III, and IV only
E. I, II, III, and IV
The specific location on the floor of an exchange where a particular security is traded is
called a:
A. box office.
B. figure 6.
C. DMMs post.
D. trading booth.
E. seat.
Obama and Biden International just announced it will be paying an annual dividend of
$0.90 a share plus an extra dividend of $0.30 a share this year. The company also
announced that its regular dividend, which is all it anticipates paying after this year, will
increase by 4.5 percent annually. What is the anticipated dividend per share next year?
A. $0.82
B. $0.90
C. $0.94
D. $1.15
E. $1.19
Kurts Forest Products is currently issuing both 5-year and 10-year bonds at par. The
bonds each pay 6.5 percent annual interest and have face values of $1,000. You decide
to purchase one of each of these bonds. Assume the yield to maturity on each of these
bonds is 7.4 percent 1 year from now. Given this, you will realize _____ percent price
depreciation on the 5-year bond and _____ percent price depreciation on the 10-year
bond.
A. 3.02; 3.39
B. 3.02; 4.08
C. 3.02; 5.77
D. 3.39; 4.08
E. 3.39; 5.77
Which one of the following best matches the primary goal of financial management?
A. Increasing the dollar amount of each sale
B. Increasing traffic flow within the firms stores
C. Transforming fixed costs into variable costs
D. Increasing the firms liquidity
E. Increasing the market value of the firm
During a normal month, Florence Lumber receives a total of eight checks with a total
value of $576,000. On average, it takes 1 day from the date of deposit for the funds
from these checks to be available to the firm. Assume each month has 30 days. What is
the average daily float?
A. $19,200
B. $273,000
C. $576,000
D. 8,190,000
E. $17,280,000
Eric is considering an investment that will pay $5,000 a year for seven years, starting
one year from today. How much should she pay for this investment if she wishes to earn
a 13 percent rate of return?
A. $17,899.08
B. $18,023.88
C. $20,186.75
D. $22,113.05
E. $23,749.24
Birds of a Feather has 10-year bonds outstanding that carry an annual coupon of 8
percent. The bonds mature in 7 years and are currently priced at 110 percent of face
value. What is the firms pretax cost of debt?
A. 6.20 percent
B. 6.60 percent
C. 7.34 percent
D. 7.70 percent
E. 8.23 percent
The stock of Southern United is priced at $40 a share and has a dividend yield of 2.1
percent. The firm pays constant annual dividends. What is the amount of the next
dividend per share?
A. $0.021
B. $0.210
C. $0.840
D. $0.871
E. $0.875