68. If interest rates fall shortly before you sell the bond, you will sell at a higher price than if interest rates had been constant. Genuine

70. The total required real rate of return is equal to the real rate of return plus the inflation premium. Incorrect

74. The risk premium is equal to the required yield to maturity minus both the real rate of return and the inflation premium. Genuine

75. Business risk relates to the inability of the firm to meet its debt obligations as they come due. Incorrect

76. Risk premiums are higher for riskier securities, but the risk premium cannot be higher than the required return. True

81. The longer the maturity of a bond, the greater the impact on price to changes in market interest rates. Correct

86. Valuation of a common stock with no dividend growth potential is treated in the same manner as preferred stock. Real

91. Valuation of financial assets requires knowledge of An effective. future cash flows. B. appropriate discount rate. C. past asset performance. D. a and b.

92. The market allocates capital to companies based on A. risk. B. efficiency. C. expected returns. D. all of these

93. In a general sense, the value of any asset is the A. value of the dividends received from the asset. B. present value of the cash flows received from the asset. C. value of past dividends and price increases for the asset. D. future value of the expected earnings discounted by the asset’s cost of capital.

94. Which of the following financial dabble ne demek assets is likely to have the highest required rate of return based on risk? Continue reading →