Which of the following would increase risk to the bondholder?
A.A call provision
B.Change in bond rating from A to AAA
C.Secured by specific assets
D.Restrictive covenants
When a firm factors its accounts receivable as opposed to pledging them, the firm will:
A.offer the lender the accounts receivable as collateral to the loan.
B.sell the accounts receivable at a discount to the lender.
C.in all cases, remain liable for any uncollected accounts sold to the lender.
D.None of the above
Which of the following is true regarding the variance of a probability distribution?
A.A large variance implies a wide distribution with steeply sloping sides and a high
peak.
B.A small variance implies a wide distribution with gently sloping sides and a high
peak.
C.A large variance implies a wide distribution with gently sloping sides and a low peak.
D.A small variance implies a narrow distribution with steeply sloping sides and a low
peak.
The principal function of financial statements is to:
A.convey confidential information to the board of directors.
B.accurately project future cash flows of a company.
C.convey information to outside investors.
D.guarantee an accurate accounting record.
Willamson Inc.’s bonds have a coupon rate of 12% and a par value of $1,000. The
bonds have 15 years left to maturity. If Williamson’s bonds are currently selling for
$1,430, calculate their yield to maturity. Assume semiannual coupon payments.
A.3.1%
B.5.3%
C.7.2%
D.9.8%
Bonds are referred to as non-amortizable debt, which means:
A.interest is paid regularly during the term, usually semiannually whereas repayments
of principal are annual.
B.interest is paid regularly during the term, usually semiannually, and repayments of
principal are semiannual.
C.interest is paid regularly during the term, usually semiannually, whereas repayment of
principal does not occur until the maturity date.
D.interest and principal are paid regularly during the term, usually annually.
If one expects the annual dividend to be $0.95 five years from today when the current
dividend is $0.62, the annual dividend growth rate must be:
A.9%.
B.11%.
C.7%.
D.13%.
Segwick Corp is estimating sales in Year 1 of $250,000 and cost of goods sold of
$100,000. Given the following assumptions for Year 1, what is the projected change in
working capital for that year? (Round to nearest $)
A.($14,444)
B.($24,444)
C.($34,444)
D.($44,444)
Which of the following is not a means for a bank to secure short-term loans made to a
firm?
A.Clean-up requirements
B.Compensating balance
C.Having a specific asset pledged as collateral for the loan
D.Stretching payables
Which of the following is included in the calculation of the balance of trade?
A.Payments between governments
B.Investing activities
C.Purchases of goods and services
D.All of the above are included.
E.None of the above is included.
The price of a share of stock today is $25.00. If the return on the share is estimated at
18% and the stock generally pays a dividend of $1 per year, what is its projected selling
price in one year?
A.$22.30
B.$30.00
C.$28.50
D.$29.50