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Question;26. Unsystematic risk is the relevant portion of an;asset's risk attributable to market factors that affect all firms.;27. The required return on an asset is an increasing;function of its nondiversifiable risk.;28. The empirical measurement of beta can be approached;by using least-squares;regression analysis to find the regression coefficient (bj) in the equation for;the slope of the "characteristic line.;29. Nico owns 100 shares of stock X which has a;price of $12 per share and 200 shares of stock Y which has a price of $3 per;share. What is the proportion of Nico's portfolio invested in stock;X?;A) 77%;B) 67%;C) 50%;D) 33%;30. Nico wants to;invest all of his money in just two assets: the risk free asset and the market;portfolio. What is Nico's portfolio beta if he invests a quarter of;his money in the market portfolio and the rest in the risk free asset?;A) 0.00;B) 0.25;C) 0.75;D) 1.00;31. What is the expected market return if the expected;return on asset X is 20 percent, its beta is 1.5, and the risk free rate is 5;percent?;A) 5.0%;B) 7.5%;C) 15.0%;D) 22.5%;32. The term structure of interest rates is the;graphical presentation of the relationship between the annual rate of interest;earned on a security purchased on a given day and held to maturity and the;remaining time to maturity.;33. An inverted yield curve is a downward-sloping;yield curve that indicates generally cheaper long-term borrowing costs than short-term;borrowing costs.;34. A yield curve that reflects relatively similar;borrowing costs for both short- and long-term loans is called a normal yield curve.;35. Upward-sloping yield curves result from higher future;inflation expectations, lender preferences for shorter maturity loans, and;greater supply of short-term;as opposed to long-term;loans relative to their respective demand.;36. The risk free rate of interest is equal to the sum;of the real rate of interest plus an inflation risk premium.;37. An inverted yield curve is upward-sloping;and indicates generally cheaper long-term borrowing costs than short-term;borrowing costs.;38. A yield curve that reflects relatively similar;borrowing costs for both short-term and long-term loans is called;A) normal yield curve.;B) inverted yield curve.;C) flat yield curve.;D) none of the above.;39. The theory suggesting that for any given issuer;long-term;interest rates tends to be higher than short-term rates is called;period where lower future inflation is expected;would most likely be;A) upward-sloping.;B) flat.;C) downward-sloping.;D) linear.;42. In a bond indenture, the term security interest;refers to the fact that most firms that issue bonds are required to establish;sinking fund provisions to protect bondholders.;43. In a bond indenture, the term security interest;refers to collateral pledged against the bond.;44. The length of the maturity on a bond offering;affects its cost. In general, the longer the maturity, the higher the cost.;45. The length of the maturity on a bond offering;affects its cost. In general, the longer the maturity, the lower the cost.;46. All of the following are examples of long-term;debt EXCEPT;A) bonds.;B) lines of credit.;C) term loans.;D) debentures.;47. The legal contract;setting forth the terms and provisions of a corporate bond is a(n);A) indenture.;B) debenture.;C) loan document.;D) promissory note.;48. ________ is a stipulation in a long-term;debt agreement that subsequent or less important creditors agree to wait until;all claims of the ________ are satisfied before having their claims satisfied.;A) Subordination, common stockholders;B) Subordination, senior debt;C) The combination restriction, senior debt;D) The senior debt, common stockholders;49. Violation of any standard or restrictive provision;by the borrower gives the lender the right to do all of the following EXCEPT;A) alter the terms of the initial;agreement, for example accelerate the maturity date.;B) demand immediate repayment.;C) increase the interest rate.;D) seize the loan collateral.;50. To compensate for the;uncertainty of future interest rates and the fact that the longer the term of a;loan the higher the probability that the borrower will default, the lender;typically;A) charges a higher interest rate on;long-term loans.;B) reserves the right to change the terms;of the loan at any time.;C) includes excessively restrictive debt;provisions.

 

Paper#50914 | Written in 18-Jul-2015

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