between bond ratings and the required return on a bond; The required return is lowest for AAA rated bonds, and required returns increase as the ratings get lower (worse). False 5. The balance sheet is a financial statement measuring the flow of funds into and out of various accounts over time while the income statement measures the progress of the firm at a point in time. True 6. Typically, debentures have higher interest rates than mortgage bonds primarily
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on a subordinated debenture than on a second mortgage bond. _F___ 2. Because short-term interest rates are much more volatile than long-term rates, you would, in the real world, be subject to much more interest rate risk if you purchased a 30-day bond than if you bought a 30-year bond. __T__ 3. For bonds, price sensitivity to a given change in interest rates generally increases as years remaining to maturity increases. __F__ 4. A bond that is callable has a chance of being retired earlier
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Stock-purchase warrants C) Calls D) Puts 5 17. When the required return is constant and equal to the coupon rate, the price of a bond as it approaches its maturity date will A) remain constant. B) increase. C) decrease. D) change depending on whether it is a discount or premium bond. 18. If the required return is less than the coupon rate, a bond will sell at A) par. B) a discount. C) a premium. D) book value. 19. An investment advisor has recommended a $50,000 portfolio
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LOAN STOCKS AND DEBENTURES ................................................................................. 3 DEBENTURES ........................................................................................................................ 4 CONVERTIBLE DEBENTURE ............................................................................................ 4 ORDINARY SHARES............................................................................................................. 4 PREFERENCE
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before interest and tax. There were three options that the board of directors debated over: issuing new common stock, issuing preferred stock or selling bonds. As Ms. Thorp, evaluate the impact of the bond issue and of the stock issue on the EPS. What are the risks in each alternative? The bond alternative arranges to sell $50 million in bonds to a California insurance company with an interest rate of 10 percent at maturity of 15 years. There is $2.5 million sinking fund required which leaves
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reader has some knowledge of financial aspects, I have not discussed market forms with regard to market efficiency. Also, for the same reason, I don’t talk about the internal finance sources or bank loans including short loans. However, I focus on bonds and stocks. With regard to cost capital, I briefly discuss the weighted cost of capital. The word total is 3204. If we exclude the front page, the abstract, contents page and the references, the total is 2988 words. Contents Introduction
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FINANCIAL TERMS MADE EASY BY ADEEL AND MOHSIN A Accrual -Estimates of costs incurred but not yet invoiced. They are charged to the Profit and Loss Account and will also appear as liabilities in the Balance Sheet. Examples: A business records its utility bills as soon as it receives them and not when they are paid, because the service has already been used. The company ignored the date when the payment will be made. An airline sells its tickets days or even weeks before the flight is made, but it
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is an investment company that pools the funds of many individual and institutional investors to form a massive asset base. 4 Basic Types of Mutual Funds Stock Funds(also called equity), Bond Funds, Money Market Funds and Balanced Funds The two primary types of mutual funds are stock funds and bond funds. Many like to invest in index funds Stock Fund A mutual fund that invests principally in stocks. Stock mutual funds are principally categorized according to company size, the investment
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1. What is the Fisher hypothesis? Is it Valid? Explain The Fisher hypothesis (sometimes called the Fisher effect) is the proposition by Irving Fisher that the real interest rate is independent of monetary measures, specifically the nominal interest rate and the expected inflation rate. The term "nominal interest rate" refers to the actual interest rate giving the amount by which a number of shillings owed by a borrower to a lender grows over time; the term "real interest rate" refers to the amount
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Moreover, investors have gotten less risk-averse as the European sovereign-debt situation has become less volatile and the U.S. Federal Reserve has announced a third round of bond-buying stimulus. Yield Curve Most of Asian countries’ government bonds have a high yield curve. For example, the yield curve of Chinese government bonds below is over 1 per cent higher than that of U.S. Treasury. This feature mirrors the worrying credit environment in Asia. However, the credit environment will be and is being
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