Finance

1.  If the Market rates of interest are higher than the promised coupon, the bond price will trade at a _____________ to its face value.

2. The price of a bond is 93.87, the bond has 7 years until maturity and a

coupon of 8% what is the bonds yield to maturity?

3.  A measure of a Bond’s interest rate sensitivity is______________.

4.  When Short Term interest rates are higher than the rate for Medium and

Long term bonds the yield curve is said to be__________.

5.  Discounting a stream of dividends to determine the value of a stock is

Called __________ valuation.

6. Using a price/earnings ratio to value a stock is called ________valuation.

7.  A corporation earned 10$ a share last year and has a PE ratio of 15, what

is the price of the stock?

8.  A corporation’s stock yields 7% and is expected to grow at 5%. What is

the Required Rate of Return?

9.  Preferred dividends are guaranteed to be paid.  True or false

10. The valuation of a preferred stock uses the concept of a__________?

11.  What does the term Capital Budgeting refer to?

12.  What is meant by unconventional cash flows?

13.  What problems can arise in the standard IRR calculation?

14. Explain the NPV criteria for evaluating an investment.

15. What is the difference between investing and financing?

16. What are three limitations of using the Payback Rule for an Investment?

17. When considering a project’s cash flows should an analyst include Sunk

Costs and Opportunity Costs?

18. When considering a project’s cash flows, should investments in Financing

Costs be included?

19.  How are project Operating Cash Flows calculated?

20.  Define MACRS.

21.  Should MACRS be used or traditional Straight Line Depreciation?

22. How can projects with different lives and costs be evaluated?

23. What is Scenario Analysis?

Why is it useful?

24. What is Sensitivity Analysis?

Why is it useful?

25. Which is the most important in the analysis of a project: Accounting

Breakeven, Cash Flow Breakeven, or Financial Breakeven? Why?

26. Define Operating Leverage.

What is the formula for measuring Operating Leverage?

27. What is the difference between Soft and Hard Rationing?

28. What are the three forms of market efficiency?

29. Define Risk Premium.

30. In 1998 Large Company Stocks returned 28.58%. What was the real, risk

adjusted return of that year (see historical returns reference page 384)

31. The Variance calculation squares all returns, positive or negative, why?

32.  The two Major classification of risk are ____________and__________

33.  How can an investor eliminate Unsystematic Risk?

34.  What does Beta measure?

35.  A Security Market Line plots ___________ against _____________ and

36. How is the cost of preferred stock determined?

37. How is the cost of debt determined?