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1) Using semi-annual compounding rather than annual compounding will increase the
future value of an annuity.
2) A firm's cost of preferred stock is equal to the preferred dividend divided by market
price plus the dividend growth rate (Kp = D/P0 + g).
3) In today's market environment, most investment banking houses specialize in
underwriting and do not engage in the dealer-broker function.
4) The slope of the security market line (SML) will often increase when the economy is
in a boom period.
5) "Stretching the payment period" refers to the practice of trying to take a trade
discount after the discount period.
6) A trust receipt acknowledges that the lender trusts the borrower to repay the loan
before any dividends are paid.
7) Eurobond issues are sold simultaneously in several national capital markets, but
denominated in a currency different from that of the nation in which the bonds are
issued.
8) The net present value profile's weakness is that it does not provide a decision for
mutually exclusive investments.
9) For most firms, the primary motive for holding cash is the transaction motive.
10) Liquidity ratios indicate how fast a firm can generate cash to pay bills.
11) Financial leverage emphasizes the impact of using debt in the business.
