1) A 100% stock dividend and a 2-for-1 stock split will result in the same number of
shares of stock being held by investors after the transaction is completed.
2) To evaluate or compare investment proposals, we must adjust the value of all cash
flows to a common date.
3) In a perfect market, investors are only concerned with total returns and are not
concerned whether it is in capital gains or dividend income.
4) Corporations have two costs of common equity, one for retained earnings and one if
the company issues new common stock.
5) The par value of a corporate bond indicates the payment that the issuer promises to
make to the bondholder at maturity.
6) The provisions of the Sarbanes-Oxley Act of 2002, or SOX, apply to all U.S.-based
corporations, as well as to foreign corporations conducting business in U.S. markets.
7) A cross rate is the computation of an exchange rate for a currency from the exchange
rates of two other currencies.
8) Inputs using an Excel spreadsheet are almost identical to those on a financial
calculator, except the interest rate is entered either as a decimal (.05) or a whole number
followed by a % sign (5%) rather than simply a whole number (5) as you would enter
using a financial calculator.
9) The Wall Street Journal bond quotes indicate that the net close for a bond with a
$1,000 par value is 100. The closing price for that bond was $100.75.
10) The time value of money is the opportunity cost of passing up the earning potential
of a dollar today.
11) Money market mutual funds are diversified portfolios of short-term, high-grade
debt instruments.
12) The inclusion of a compensating balance requirement in a line of credit will reduce
the effective annual cost of credit since the bank has additional collateral for the
borrowing.