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Financial Management 2017 - Quiz and Case Study Guides - Financial Management: Core Concepts, 3e (Brooks) - Quiz - Chapter 6

Financial Management 2016 - 2017

FINANCIAL MANAGEMENT 2017 - QUIZ AND CASE STUDY GUIDES

Financial Management: Core Concepts, 3e (Brooks)

Chapter 6   Bonds and Bond Valuation

 

 

Financial Management: Core Concepts, 3e (Brooks)

Chapter 6   Bonds and Bond Valuation

 

6.1   Application of the Time Value of Money Tool: Bond Pricing

 

1) A bond may be issued by ________.

  1. A) companies
  2. B) state governments
  3. C) the federal government
  4. D) All of the above

Answer:  D

Diff: 1

Topic:  6.1 Application of the Time Value of Money Tool: Bond Pricing

AACSB:  3 Analytical Thinking

LO:  6.1 Understand basic bond terminology and apply the time value of money equation in pricing bonds.

 

2) A bond is a ________ instrument by which a borrower of funds agrees to pay back the funds with interest on specific dates in the future.

  1. A) long-term equity
  2. B) long-term debt
  3. C) short-term debt
  4. D) short-term equity

Answer:  B

Diff: 1

Topic:  6.1 Application of the Time Value of Money Tool: Bond Pricing

AACSB:  3 Analytical Thinking

LO:  6.1 Understand basic bond terminology and apply the time value of money equation in pricing bonds.

 

3) Bonds are sometimes called ________ securities because they pay set amounts on specific future dates.

  1. A) variable-income
  2. B) fixed-income
  3. C) bully
  4. D) real

Answer:  B

Diff: 1

Topic:  6.1 Application of the Time Value of Money Tool: Bond Pricing

AACSB:  3 Analytical Thinking

LO:  6.1 Understand basic bond terminology and apply the time value of money equation in pricing bonds.

4) The ________ is the annual coupon payment divided by the current price of the bond, and is not always an accurate indicator.

  1. A) current yield
  2. B) yield to maturity
  3. C) bond discount rate
  4. D) coupon rate

Answer:  A

Diff: 1

Topic:  6.1 Application of the Time Value of Money Tool: Bond Pricing

AACSB:  3 Analytical Thinking

LO:  6.1 Understand basic bond terminology and apply the time value of money equation in pricing bonds.

 

5) The ________ is the yield an individual would receive if the individual purchased the bond today and held the bond to the end of its life.

  1. A) current yield
  2. B) yield to maturity
  3. C) prime rate
  4. D) coupon rate

Answer:  B

Diff: 1

Topic:  6.1 Application of the Time Value of Money Tool: Bond Pricing

AACSB:  3 Analytical Thinking

LO:  6.1 Understand basic bond terminology and apply the time value of money equation in pricing bonds.

 

6) The four steps to determining the price of a bond are:

  1. A) determine the amount and timing of the present cash flows, determine the appropriate discount rate, find the present value of the lump-sum principal and the annuity stream of coupons, and add the PVs of the principal and coupons.
  2. B) determine the amount and timing of the future cash flows, determine the appropriate discount rate, find the future value of the lump-sum principal and the annuity stream of coupons, and add the FVs of the principal and coupons.
  3. C) determine the amount and timing of the future cash flows, determine the appropriate discount rate, find the present value of the lump-sum principal and the annuity stream of coupons, and multiply the PVs of the principal and coupons.
  4. D) determine the amount and timing of the future cash flows, determine the appropriate discount rate, find the present value of the lump-sum principal and the annuity stream of coupons, and add the PVs of the principal and coupons.

Answer:  D

Diff: 1

Topic:  6.1 Application of the Time Value of Money Tool: Bond Pricing

AACSB:  3 Analytical Thinking

LO:  6.1 Understand basic bond terminology and apply the time value of money equation in pricing bonds.

7) Blackburn Inc. has issued 30-year $1,000 face value, 10% annual coupon bonds, with a yield to maturity of 9.0%. The annual interest payment for the bond is ________.

  1. A) $100
  2. B) $90
  3. C) $50
  4. D) $45

Answer:  A

Explanation:  A) The annual interest or coupon payment is equal to the coupon rate multiplied by the par value of the bond. Here that is (0.10) × ($1,000) = $100.

Diff: 2

Topic:  6.1 Application of the Time Value of Money Tool: Bond Pricing

AACSB:  3 Analytical Thinking

LO:  6.1 Understand basic bond terminology and apply the time value of money equation in pricing bonds.

 

 

8) Johnson Construction Inc. has issued 20-year $1,000 face value, 8% annual coupon bonds, with a yield to maturity of 10%. The current price of the bond is ________.

  1. A) $1,000.00
  2. B) $1,196.36
  3. C) $829.73
  4. D) There is not enough information to answer this question.

Answer:  C

Explanation:  C)

Bond Price = PMT ×  +  

= $80 ×  +  = $829.73.

MODE = END

INPUT            20              10          ?             -80         -1,000

KEY                 N               I/Y         PV         PMT     FV

CPT                 829.73

Diff: 2

Topic:  6.1 Application of the Time Value of Money Tool: Bond Pricing

AACSB:  3 Analytical Thinking

LO:  6.1 Understand basic bond terminology and apply the time value of money equation in pricing bonds.

9) Petty Productions Inc. recently issued 30-year $1,000 face value, 12% annual coupon bonds. The market discount rate for this bond is only 7%. What is the current price of this bond?

  1. A) $387.59
  2. B) $597.24
  3. C) $1,000.00
  4. D) $1,620.45

Answer:  D

Explanation:  D)

Bond Price = PMT ×  +  

= $120 ×  +  = $1,620.45.

MODE = END

INPUT            30              7            0             -120      -1,000

KEY                 N               I/Y         PV          PMT     FV

CPT                  1,620.45

Diff: 2

Topic:  6.1 Application of the Time Value of Money Tool: Bond Pricing

AACSB:  3 Analytical Thinking

LO:  6.1 Understand basic bond terminology and apply the time value of money equation in pricing bonds.

 

 

10) The ________ is the face value of the bond.

  1. A) coupon rate
  2. B) maturity date
  3. C) par value
  4. D) coupon

Answer:  C

Diff: 1

Topic:  6.1 Application of the Time Value of Money Tool: Bond Pricing

AACSB:  3 Analytical Thinking

LO:  6.1 Understand basic bond terminology and apply the time value of money equation in pricing bonds.

 

11) The ________ is the regular interest payment of the bond.

  1. A) dividend
  2. B) par
  3. C) coupon rate
  4. D) coupon

Answer:  D

Diff: 1

Topic:  6.1 Application of the Time Value of Money Tool: Bond Pricing

AACSB:  3 Analytical Thinking

LO:  6.1 Understand basic bond terminology and apply the time value of money equation in pricing bonds.

12) The ________ is the return the bondholder receives on the bond if held to maturity.

  1. A) coupon
  2. B) coupon rate
  3. C) yield to maturity
  4. D) par rate

Answer:  C

Diff: 1

Topic:  6.1 Application of the Time Value of Money Tool: Bond Pricing

AACSB:  3 Analytical Thinking

LO:  6.1 Understand basic bond terminology and apply the time value of money equation in pricing bonds.

 

13) The ________ is the expiration date of the bond.

  1. A) future value
  2. B) yield to maturity
  3. C) maturity date
  4. D) coupon

Answer:  C

Diff: 1

Topic:  6.1 Application of the Time Value of Money Tool: Bond Pricing

AACSB:  3 Analytical Thinking

LO:  6.1 Understand basic bond terminology and apply the time value of money equation in pricing bonds.

 

 

14) Five years ago, Thompson Tarps Inc. issued twenty-five-year 10% annual coupon bonds with a $1,000 face value each. Since then, interest rates in general have risen and the yield to maturity on the Thompson bonds is now 12%. Given this information, what is the price today for a Thompson Tarps bond?

  1. A) $843.14
  2. B) $850.61
  3. C) $1,181.54
  4. D) $1,170.27

Answer:  B

Explanation:  B)

Bond Price = PMT ×  +  

= $100 ×  +  = $850.61.

 

MODE = END

INPUT           20             12             0            -100       -1,000

KEY                N             I/Y            PV         PMT      FV

CPT                850.61

Diff: 3

Topic:  6.1 Application of the Time Value of Money Tool: Bond Pricing

AACSB:  3 Analytical Thinking

LO:  6.1 Understand basic bond terminology and apply the time value of money equation in pricing bonds.

Hmwrk Questions:  * Taken from "Prepping for Exams" questions at the end of the chapter.

 

15) Ten years ago Bacon Signs Inc. issued twenty-five-year 8% annual coupon bonds with a $1,000 face value each. Since then, interest rates in general have fallen and the yield to maturity on the Bacon bonds is now 7%. Given this information, what is the price today for a Bacon Signs bond?

  1. A) $1,000
  2. B) $1,116.54
  3. C) $1,091.08
  4. D) $914.41

Answer:  C

Explanation:  C)

Bond Price = PMT ×  +  

= $80 ×  +  = $1,091.08.

 

MODE = END

INPUT            15              7            0            -80         -1,000

KEY                 N               I/Y         PV         PMT      FV

CPT                 1,091.08

Diff: 3

Topic:  6.1 Application of the Time Value of Money Tool: Bond Pricing

AACSB:  3 Analytical Thinking

LO:  6.1 Understand basic bond terminology and apply the time value of money equation in pricing bonds.

 

16) Ten years ago Bacon Signs Inc. issued twenty-five-year 8% annual coupon bonds with a $1,000 face value each. Since then, interest rates in general have risen and the yield to maturity on the Bacon bonds is now 9%. Given this information, what is the price today for a Bacon Signs bond?

  1. A) $1,000
  2. B) $919.39
  3. C) $901.77
  4. D) $1.085.59

Answer:  B

Explanation:  B)

Bond Price = PMT ×  +  

= $80 ×  +  = $919.39.

 

MODE = END

INPUT            15              12          0            -80         -1,000,000

KEY                 N               I/Y         PV         PMT     FV

CPT                 919.39

Diff: 3

Topic:  6.1 Application of the Time Value of Money Tool: Bond Pricing

AACSB:  3 Analytical Thinking

LO:  6.1 Understand basic bond terminology and apply the time value of money equation in pricing bonds.

 

17) The appropriate rate to use to discount the cash flows of a bond in order to determine the current price is the ________.

  1. A) yield to maturity
  2. B) coupon rate
  3. C) par rate
  4. D) current yield

Answer:  A

Diff: 1

Topic:  6.1 Application of the Time Value of Money Tool: Bond Pricing

AACSB:  3 Analytical Thinking

LO:  6.1 Understand basic bond terminology and apply the time value of money equation in pricing bonds.

 

18) Fifteen years ago TravelEasy Inc. issued twenty-five-year 10% annual coupon bonds with a $1,000 face value each. Since then, interest rates in general have fallen and the yield to maturity on the firm's bonds is now 6%. Given this information, what is the price today for a TravelEasy bond?

  1. A) $1,000
  2. B) $1,294.40
  3. C) $1,091.08
  4. D) $914.41

Answer:  B

Explanation:  B)

Bond Price = PMT ×  +  

MODE = END

INPUT           10                6            0            -100       -1,000

KEY                N                I/Y         PV         PMT      FV

CPT                1,294.40

Diff: 3

Topic:  6.1 Application of the Time Value of Money Tool: Bond Pricing

AACSB:  3 Analytical Thinking

LO:  6.1 Understand basic bond terminology and apply the time value of money equation in pricing bonds.

 

19) Twenty years ago JeffCo Inc. issued thirty-year 9% annual coupon bonds with a $1,000 face value each. Since then, interest rates in general have risen and the yield to maturity on the firm's bonds is now 11%. Given this information, what is the price today for a bond from this issue?

  1. A) $1,000
  2. B) $1,116.54
  3. C) $882.22
  4. D) $914.41

Answer:  C

Explanation:  C)

Bond Price = PMT ×  +  

MODE = END

INPUT            10              11          0            -90         -1,000

KEY                 N               I/Y         PV         PMT      FV

CPT                  882.22

Diff: 3

Topic:  6.1 Application of the Time Value of Money Tool: Bond Pricing

AACSB:  3 Analytical Thinking

LO:  6.1 Understand basic bond terminology and apply the time value of money equation in pricing bonds.

 

20) The coupon payment for an annual-coupon corporate bond is equal to the yield to maturity multiplied by the par value of the bond.

Answer:  FALSE

Explanation:  The coupon payment for an annual-coupon corporate bond is equal to the COUPON RATE multiplied by the par value of the bond.

Diff: 1

Topic:  6.1 Application of the Time Value of Money Tool: Bond Pricing

AACSB:  3 Analytical Thinking

LO:  6.1 Understand basic bond terminology and apply the time value of money equation in pricing bonds.

 

21) Johnson Products issued $1,000 face value 20-year bonds five years ago. These bonds are currently selling for $1,218.47. From this information we can conclude that the Johnson Products bonds have a yield-to-maturity greater than the coupon rate on these bonds.

Answer:  FALSE

Explanation:  Prices and interest rates are inversely related. Therefore, a higher price means the yield-to-maturity is less than the original coupon rate.

Diff: 1

Topic:  6.1 Application of the Time Value of Money Tool: Bond Pricing

AACSB:  3 Analytical Thinking

LO:  6.1 Understand basic bond terminology and apply the time value of money equation in pricing bonds.

 

22) Zero-coupon bonds are more difficult and time-consuming to price because of the extensive revision of the basic bond pricing formula.

Answer:  FALSE

Explanation:  The bond pricing formula has two components. The first part prices the face value and the second part determines the value of the coupon payments. Because there are no coupon payments, the second part of the equation always has a value of $0. This makes zero-coupon bonds comparatively easy to price.

Diff: 1

Topic:  6.1 Application of the Time Value of Money Tool: Bond Pricing

AACSB:  3 Analytical Thinking

LO:  6.1 Understand basic bond terminology and apply the time value of money equation in pricing bonds.

 

23) The coupon payment for an annual-coupon corporate bond is equal to the coupon rate multiplied by the current price of the bond.

Answer:  FALSE

Explanation:  The coupon payment for an annual-coupon corporate bond is equal to the coupon rate multiplied by the PAR VALUE of the bond.

Diff: 1

Topic:  6.1 Application of the Time Value of Money Tool: Bond Pricing

AACSB:  3 Analytical Thinking

LO:  6.1 Understand basic bond terminology and apply the time value of money equation in pricing bonds.

24) The coupon rate for a bond is the interest rate for the coupons, stated in annual terms, and printed on the bond. It normally remains the same throughout the life of the bond.

Answer:  TRUE

Diff: 1

Topic:  6.1 Application of the Time Value of Money Tool: Bond Pricing

AACSB:  3 Analytical Thinking

LO:  6.1 Understand basic bond terminology and apply the time value of money equation in pricing bonds.

 

25) Assume that today's date is August 15, 2015 and that the Kroger Bond is an annual-coupon bond. Describe what each of the following terms mean and how each value was determined if appropriate.

 

 

Company

 

Price

 

Coupon Rate

Maturity Date

 

YTM

Current Yield

 

Rating

Kroger

84.00

6.875%

8-15-2020

10.576%

8.185%

B2

 

Answer:  Kroger is the issuer. The value of 84.00 in the category price means that the bond is currently selling for 84% of the bond's par value. The coupon rate is the annual interest rate. This bond matures five years from today, and is the date on which the final interest installment is paid and the principal is repaid. A value of 6.875% means the bond pays out this percentage of the bond's par value each year. The YTM is the yield to maturity and represents the return you would receive if you purchased the bond today at the price of $84.00 per $100 of face value and held it to maturity. The YTM is determined by market forces. The current yield is found by dividing the annual coupon payment by the current price. The rating is the bond rating for this bond—a grade indicating credit quality.

Diff: 2

Topic:  6.1 Application of the Time Value of Money Tool: Bond Pricing

AACSB:  3 Analytical Thinking

LO:  6.1 Understand basic bond terminology and apply the time value of money equation in pricing bonds.

26) Progressive Plastics Inc. issued 30-year 7% annual coupon bonds five years ago. Currently, the yield to maturity is 9.65% on these $1,000 par value bonds. What is the current price per bond?

Answer: 

Bond Price = PMT ×  +  

= $70 ×  +  = $752.84.

 

MODE = END

INPUT            25            9.65         ?            -70         -1,000

KEY                 N             I/Y           PV         PMT      FV

CPT                 752.84

Diff: 2

Topic:  6.1 Application of the Time Value of Money Tool: Bond Pricing

AACSB:  3 Analytical Thinking

LO:  6.1 Understand basic bond terminology and apply the time value of money equation in pricing bonds.

 

 

6.2   Semiannual Bonds and Zero-Coupon Bonds

 

1) The Cougar Corporation has issued 20-year semiannual coupon bonds with a face value of $1,000. If the annual coupon rate is 10% and the current yield to maturity is 12%, what is the firm's current price per bond?

  1. A) $850.61
  2. B) $849.54
  3. C) $1,170.27
  4. D) $1,171.59

Answer:  B

Explanation:  B)

Bond Price = PMT ×  +  

= $50 ×  +  = $849.54.

MODE = END, P/Y = 2, C/Y = 2

INPUT           40               12          ?            -50          -1,000

KEY                N                I/Y         PV         PMT       FV

CPT                849.54

Diff: 3

Topic:  6.2 Semiannual Bonds and Zero-Coupon Bonds

AACSB:  3 Analytical Thinking

LO:  6.2 Understand the difference between annual and semiannual bonds and note the key features of zero-coupon bonds.

 

2) Endicott Enterprises Inc. has issued 30-year semiannual coupon bonds with a face value of $1,000. If the annual coupon rate is 14% and the current yield to maturity is 8%, what is the firm's current price per bond?

  1. A) $578.82
  2. B) $579.84
  3. C) $1,675.47
  4. D) $1,678.70

Answer:  D

Explanation:  D)

Bond Price = PMT ×  +  

= $70 ×  +  = $1,678.70.

MODE = END, P/Y = 2, C/Y = 2

INPUT            60               8            ?             -70        -1,000

KEY                N               I/Y         PV          PMT     FV

CPT                 1,678.70

Diff: 3

Topic:  6.2 Semiannual Bonds and Zero-Coupon Bonds

AACSB:  3 Analytical Thinking

LO:  6.2 Understand the difference between annual and semiannual bonds and note the key features of zero-coupon bonds.

Hmwrk Questions:  * Taken from "Prepping for Exams" questions at the end of the chapter.

 

3) Endicott Enterprises Inc. has issued 30-year semiannual coupon bonds with a face value of $1,000. If the annual coupon rate is 14% and the current yield to maturity is 15%, what is the firm's current price per bond?

  1. A) $934.20
  2. B) $1,000.00
  3. C) $934.34
  4. D) $466.79

Answer:  A

Explanation:  A)

Bond Price = PMT ×  +  

= $70 ×  +  = $934.20

MODE = END, P/Y = 2, C/Y = 2

INPUT            60              15          ?             -70         -1,000

KEY                 N               I/Y         PV          PMT      FV

CPT                 934.20

Diff: 3

Topic:  6.2 Semiannual Bonds and Zero-Coupon Bonds

AACSB:  3 Analytical Thinking

LO:  6.2 Understand the difference between annual and semiannual bonds and note the key features of zero-coupon bonds.

 

4) Hampton Construction Inc. has issued 20-year semiannual coupon bonds with a face value of $1,000. If the annual coupon rate is 12% and the current yield to maturity is 10%, what is the firm's current price per bond?

  1. A) $934.20
  2. B) $1,000.00
  3. C) $1,171.59
  4. D) $1,362.74

Answer:  C

Explanation:  C) Bond Price = PMT ×  +  

MODE = END, P/Y = 2, C/Y = 2

INPUT                40          10          ?             -60         -1,000

KEY                     N           I/Y         PV         PMT      FV

CPT                     1,171.59

Diff: 3

Topic:  6.2 Semiannual Bonds and Zero-Coupon Bonds

AACSB:  3 Analytical Thinking

LO:  6.2 Understand the difference between annual and semiannual bonds and note the key features of zero-coupon bonds.

 

5) Plymouth Fountains Inc. has issued 30-year semiannual coupon bonds with a face value of $1,000. If the annual coupon rate is 6% and the current yield to maturity is 7%, what is the firm's current price per bond?

  1. A) $875.28
  2. B) $1,000.00
  3. C) $934.34
  4. D) $466.79

Answer:  A

Explanation:  A)

Bond Price = PMT ×  +  

MODE = END, P/Y = 2, C/Y = 2

INPUT            60              7            ?             -30         -1,000

KEY                 N               I/Y         PV          PMT      FV

CPT                  875.28

Diff: 3

Topic:  6.2 Semiannual Bonds and Zero-Coupon Bonds

AACSB:  3 Analytical Thinking

LO:  6.2 Understand the difference between annual and semiannual bonds and note the key features of zero-coupon bonds.

 

6) Most U.S. corporate and government bonds choose to make ________ coupon payments.

  1. A) annual
  2. B) semiannual
  3. C) quarterly
  4. D) monthly

Answer:  B

Diff: 1

Topic:  6.2 Semiannual Bonds and Zero-Coupon Bonds

AACSB:  3 Analytical Thinking

LO:  6.2 Understand the difference between annual and semiannual bonds and note the key features of zero-coupon bonds.

 

7) Which of the following types of bonds, as characterized by a feature, by definition has two coupon payments per year?

  1. A) Consol
  2. B) Semiannual
  3. C) Zero-coupon
  4. D) Putable

Answer:  B

Diff: 1

Topic:  6.2 Semiannual Bonds and Zero-Coupon Bonds

AACSB:  3 Analytical Thinking

LO:  6.2 Understand the difference between annual and semiannual bonds and note the key features of zero-coupon bonds.

 

8) RC Inc. just issued zero-coupon bonds with a par value of $1,000. If the bond has a maturity of 15 years and a yield to maturity of 10%, what is the current price of the bond if it is priced in the conventional manner?

  1. A) $1,000
  2. B) $239.39
  3. C) $231.38
  4. D) This question cannot be answered because the coupon payment information is missing.

Answer:  C

Explanation:  C) The conventional way to price a zero-coupon bond is to discount the par value assuming semiannual compounding. Zero-coupon Bond Price =  =  = $231.38.

MODE = END, P/Y = 2, C/Y = 2

INPUT            30              10          ?             0            -1,000

KEY                 N               I/Y         PV          PMT      FV

CPT                  231.38

Diff: 3

Topic:  6.2 Semiannual Bonds and Zero-Coupon Bonds

AACSB:  3 Analytical Thinking

LO:  6.2 Understand the difference between annual and semiannual bonds and note the key features of zero-coupon bonds.

 

9) Zero-coupon U.S. Government bonds are known as ________.

  1. A) STRIPS
  2. B) muni-bonds
  3. C) Uncle Sam's Empty Pockets
  4. D) BLANKS

Answer:  A

Explanation:  A) STRIPS is an acronym for Separate Trading of Registered Interest and Principal.

Diff: 2

Topic:  6.2 Semiannual Bonds and Zero-Coupon Bonds

AACSB:  3 Analytical Thinking

LO:  6.2 Understand the difference between annual and semiannual bonds and note the key features of zero-coupon bonds.

 

10) The difference between the price and the par value of a zero-coupon bond represents ________.

  1. A) taxes payable by the bond buyer
  2. B) the accumulated principal over the life of the bond
  3. C) the bond premium
  4. D) the accumulated interest over the life of the bond

Answer:  D

Diff: 2

Topic:  6.2 Semiannual Bonds and Zero-Coupon Bonds

AACSB:  3 Analytical Thinking

LO:  6.2 Understand the difference between annual and semiannual bonds and note the key features of zero-coupon bonds.

 

11) Vitmix Industries Inc. is issuing a zero-coupon bond that will have a maturity of fifty years. The bond's par value is $1,000, and the current yield on similar bonds is 7.5%. What is the expected price of this bond, using the semiannual convention?

  1. A) $25.19
  2. B) $250.19
  3. C) $750.00
  4. D) $1,000.00

Answer:  A

Explanation:  A)

Zero coupon bond price =  =  = $25.19

MODE = END, P/Y = 2, C/Y = 2

INPUT           100            7.5           ?             0            -1,000

KEY                N              I/Y           PV          PMT     FV

CPT                25.19

Diff: 2

Topic:  6.2 Semiannual Bonds and Zero-Coupon Bonds

AACSB:  3 Analytical Thinking

LO:  6.2 Understand the difference between annual and semiannual bonds and note the key features of zero-coupon bonds.

 

12) Almost all corporate and government bonds pay coupons on an annual basis.

Answer:  FALSE

Explanation:  Almost all corporate and government bonds pay coupons on a SEMIANNUAL basis.

Diff: 1

Topic:  6.2 Semiannual Bonds and Zero-Coupon Bonds

AACSB:  3 Analytical Thinking

LO:  6.2 Understand the difference between annual and semiannual bonds and note the key features of zero-coupon bonds.

 

13) When pricing a zero-coupon bond, the convention is to use the semiannual pricing formula rather than the annual pricing formula.

Answer:  TRUE

Diff: 2

Topic:  6.2 Semiannual Bonds and Zero-Coupon Bonds

AACSB:  3 Analytical Thinking

LO:  6.2 Understand the difference between annual and semiannual bonds and note the key features of zero-coupon bonds.

 

14) Zero-coupon bonds are priced at deep discounts.

Answer:  TRUE

Diff: 2

Topic:  6.2 Semiannual Bonds and Zero-Coupon Bonds

AACSB:  3 Analytical Thinking

LO:  6.2 Understand the difference between annual and semiannual bonds and note the key features of zero-coupon bonds.

 

15) Zero-coupon bonds are priced at steep premiums.

Answer:  FALSE

Explanation:  Zero-coupon bonds are priced at deep discounts.

Diff: 1

Topic:  6.2 Semiannual Bonds and Zero-Coupon Bonds

AACSB:  3 Analytical Thinking

LO:  6.2 Understand the difference between annual and semiannual bonds and note the key features of zero-coupon bonds.

 

16) Franklin Framing Inc. has twenty years remaining on $1,000 par value semiannual coupon bonds paying semiannual coupons of $40. If the yield to maturity on these bonds is 6% per year, what is the current price?

Answer: 

Bond Price = PMT ×  +  

= $40 ×  +  = $1,231.15.

MODE = END, P/Y = 2, C/Y = 2

INPUT           40                6            ?             -40         -1,000

KEY                N                I/Y         PV         PMT      FV

CPT                1,231.15

Diff: 2

Topic:  6.2 Semiannual Bonds and Zero-Coupon Bonds

AACSB:  3 Analytical Thinking

LO:  6.2 Understand the difference between annual and semiannual bonds and note the key features of zero-coupon bonds.

 

 

17) Complete the following zero-coupon amortization schedule.

 

 

T (Periods)

Beginning Price

Interest Earned (6%)

Ending

Price

1

$839.62

 

$890.00

2

 

$53.40

 

3

$943.40

 

$1,000.00

 

Answer: 

 

T (Periods)

Beginning Price

Interest Earned (6%)

Ending

Price

1

$839.62

$50.38

$890.00

2

$890.00

$53.40

$943.40

3

$943.40

$56.60

$1,000.00

 

Diff: 3

Topic:  6.2 Semiannual Bonds and Zero-Coupon Bonds

AACSB:  3 Analytical Thinking

LO:  6.2 Understand the difference between annual and semiannual bonds and note the key features of zero-coupon bonds.

18) Complete the following zero-coupon amortization schedule.

 

 

T (Periods)

Beginning Price

Interest Earned (8%)

Ending

Price

1

 

$63.51

$857.34

2

 

$68.59

 

3

$925.93

 

$1,000.00

 

Answer: 

 

T (Periods)

Beginning Price

Interest Earned (8%)

Ending

Price

1

$793.83

$63.51

$857.34

2

$857.34

$68.59

$925.93

3

$925.93

$74.07

$1,000.00

 

Diff: 3

Topic:  6.2 Semiannual Bonds and Zero-Coupon Bonds

AACSB:  3 Analytical Thinking

LO:  6.2 Understand the difference between annual and semiannual bonds and note the key features of zero-coupon bonds.

 

 

6.3   Yields and Coupon Rates

 

1) The ________ is a market derived interest rate used to discount the future cash flows of the bond.

  1. A) coupon rate
  2. B) semiannual coupon rate
  3. C) yield to maturity
  4. D) compound rate

Answer:  C

Diff: 1

Topic:  6.3 Yields and Coupon Rates

AACSB:  3 Analytical Thinking

LO:  6.3 Explain the relationship between the coupon rate and the yield to maturity.

 

2) The ________ is the interest rate printed on the bond.

  1. A) coupon rate
  2. B) semiannual coupon rate
  3. C) yield to maturity
  4. D) compound rate

Answer:  A

Diff: 1

Topic:  6.3 Yields and Coupon Rates

AACSB:  3 Analytical Thinking

LO:  6.3 Explain the relationship between the coupon rate and the yield to maturity.

 

3) Ringtones Inc. wishes to issue new bonds but is uncertain how the market would set the yield to maturity. The bonds would be 20-year, 7% annual coupon bonds with a $1,000 par value. The firm has determined that these bonds would sell for $1,050 each. What is the yield to maturity for these bonds?

  1. A) 7.00%
  2. B) 6.55%
  3. C) 7.35%
  4. D) 6.54%

Answer:  D

Explanation:  D) The answer is found through an iterative (trial and error) process using the bond pricing formula.

Bond Price = PMT ×  + ;

$1,050.00 = $70 ×  + ;

r = 6.54%.

MODE = END, P/Y = 1, C/Y = 1

INPUT            20             ?            -1,050       70          1,000

KEY                 N             I/Y        PV            PMT     FV

CPT                 6.54

Diff: 3

Topic:  6.3 Yields and Coupon Rates

AACSB:  3 Analytical Thinking

LO:  6.3 Explain the relationship between the coupon rate and the yield to maturity.

 

4) The Bonsai Nursery Corporation has $1,000 par value bonds with a coupon rate of 8% per year making semiannual coupon payments. If there are twelve years remaining prior to maturity and these bonds are selling for $876.40, what is the yield to maturity for these bonds?

  1. A) 9.80%
  2. B) 8.00%
  3. C) 9.77%
  4. D) 8.33%

Answer:  C

Explanation:  C) The answer is found through an iterative (trial and error) process using the bond pricing formula. Bond Price = PMT ×  + ;

$876.40 = $40 ×  + ;

r = 4.885817%

YTM = 4.885817% × 2 = 9.77%.

MODE = END, P/Y = 2, C/Y = 2

INPUT           24               ?             -876.40      40          1,000

KEY                N                I/Y         PV             PMT     FV

CPT                9.77

Diff: 3

Topic:  6.3 Yields and Coupon Rates

AACSB:  3 Analytical Thinking

LO:  6.3 Explain the relationship between the coupon rate and the yield to maturity.

 

5) Mountain Treks Inc. has issued ten-year zero-coupon bonds with a $1,000 face value. If the bonds are currently selling for $514.87, what is the yield to maturity?

  1. A) 6.75%
  2. B) 6.86%
  3. C) 10.45%
  4. D) This question cannot be answered because there is no coupon payment provided.

Answer:  A

Explanation:  A) Use the convention of assuming semiannual discounting.

MODE = END, P/Y = 2, C/Y = 2

INPUT            20             ?             -514.87       0             1,000

KEY                 N             I/Y         PV              PMT      FV

CPT                 6.75

Diff: 3

Topic:  6.3 Yields and Coupon Rates

AACSB:  3 Analytical Thinking

LO:  6.3 Explain the relationship between the coupon rate and the yield to maturity.

 

6) When the ________ is less than the yield to maturity, the bond sells at a/the ________ the par value.

  1. A) coupon rate; premium over
  2. B) coupon rate; discount to
  3. C) time to maturity; discount to
  4. D) time to maturity; same price as

Answer:  B

Diff: 2

Topic:  6.3 Yields and Coupon Rates

AACSB:  3 Analytical Thinking

LO:  6.3 Explain the relationship between the coupon rate and the yield to maturity.

 

7) MacroMedia Inc. $1,000 par value bonds are selling for $1,265. Which of the following statements is TRUE?

  1. A) The bond market currently requires a rate (yield) less than the coupon rate.
  2. B) The bonds are selling at a premium to the par value.
  3. C) The coupon rate is greater than the yield to maturity.
  4. D) All of the above are true.

Answer:  D

Diff: 2

Topic:  6.3 Yields and Coupon Rates

AACSB:  3 Analytical Thinking

LO:  6.3 Explain the relationship between the coupon rate and the yield to maturity.

 

8) MicroMedia Inc. $1,000 par value bonds are selling for $832. Which of the following statements is TRUE?

  1. A) The bonds must have more than six years to maturity.
  2. B) The bonds are selling at a premium to the par value.
  3. C) The coupon rate is greater than the yield to maturity.
  4. D) None of the above is true.

Answer:  D

Diff: 2

Topic:  6.3 Yields and Coupon Rates

AACSB:  3 Analytical Thinking

LO:  6.3 Explain the relationship between the coupon rate and the yield to maturity.

 

9) Which of the following statements about the relationship between yield to maturity and bond prices is FALSE?

  1. A) When the yield to maturity and coupon rate are the same, the bond is called a par value bond.
  2. B) A bond selling at a premium means that the coupon rate is greater than the yield to maturity.
  3. C) When interest rates go up, bond prices go up.
  4. D) A bond selling at a discount means that the coupon rate is less than the yield to maturity.

Answer:  C

Explanation:  C) When interest rates go up, bond prices fall.

Diff: 2

Topic:  6.3 Yields and Coupon Rates

AACSB:  3 Analytical Thinking

LO:  6.3 Explain the relationship between the coupon rate and the yield to maturity.

 

10) The Douglas Dynamics Corporation $1,000 par value, 15% annual coupon bonds, have 6 years remaining to maturity and are currently selling for $938.45. What is the firm's yield to maturity for these bonds?

  1. A) 15.00%
  2. B) 16.70%
  3. C) 16.66%
  4. D) 15.47%

Answer:  B

Explanation:  B) The answer is found through an iterative (trial and error) process using the bond pricing formula.

Bond Price = PMT ×  + ;

$938.45 = $150 ×  + ;

r = 16.70%.

MODE = END, P/Y = 1, C/Y = 1

INPUT            6              ?             -938.45       150        1,000

KEY                 N             I/Y         PV              PMT      FV

CPT                  16.70

Diff: 3

Topic:  6.3 Yields and Coupon Rates

AACSB:  3 Analytical Thinking

LO:  6.3 Explain the relationship between the coupon rate and the yield to maturity.

 

11) Rogue Outfitters Inc. has outstanding $1,000 face value 8% coupon bonds that make semiannual payments, and have 14 years remaining to maturity. If the current price for these bonds is $1,118.74, what is the annualized yield to maturity?

  1. A) 6.68%
  2. B) 6.67%
  3. C) 6.12%
  4. D) 6.00%

Answer:  A

Explanation:  A) The answer is found through an iterative (trial and error) process using the bond pricing formula.

Bond Price = PMT ×  + ;

$1,118.74 = $40 ×  + ;

r = 3.340563%

YTM = 3.340563% × 2 = 6.68%.

MODE = END, P/Y = 2, C/Y = 2

INPUT            28            ?            -1,118.74      40           1,000

KEY                 N             I/Y         PV                PMT      FV

CPT                 6.68

Diff: 3

Topic:  6.3 Yields and Coupon Rates

AACSB:  3 Analytical Thinking

LO:  6.3 Explain the relationship between the coupon rate and the yield to maturity.

Hmwrk Questions:  * Taken from "Prepping for Exams" questions at the end of the chapter.

 

12) Rogue Outfitters Inc. has outstanding $1,000 face value 8% coupon bonds that make semiannual payments, and have 14 years remaining to maturity. If the current price for these bonds is $987.24, what is the annualized yield to maturity?

  1. A) 8.00%
  2. B) 8.38%
  3. C) 8.15%
  4. D) 8.64%

Answer:  C

Explanation:  C) The answer is found through an iterative (trial and error) process using the bond pricing formula.

Bond Price = PMT ×  + ;

$987.24 = $40 ×  + ;

r = 4.077260%

YTM = 4.077260% × 2 = 8.15%.

MODE = END, P/Y = 2, C/Y = 2

INPUT           28             ?             -987.24       40          1,000

KEY                N              I/Y          PV              PMT     FV

CPT                8.15

Diff: 3

Topic:  6.3 Yields and Coupon Rates

AACSB:  3 Analytical Thinking

LO:  6.3 Explain the relationship between the coupon rate and the yield to maturity.

 

 

13) Rogue Outfitters Inc. has outstanding $1,000 face value 4% coupon bonds that make semiannual payments, and have 10 years remaining to maturity. If the current price for these bonds is $938.57, what is the annualized yield to maturity?

  1. A) 4.78%
  2. B) 4.96%
  3. C) 5.02%
  4. D) 5.13%

Answer:  A

Explanation:  A) The answer is found through an iterative (trial and error) process using the bond pricing formula.

Bond Price = PMT ×  + ;

MODE = END, P/Y = 2, C/Y = 2

INPUT           20            ?             -938.57      20           1,000

KEY                N             I/Y         PV             PMT      FV

CPT                4.78

Diff: 3

Topic:  6.3 Yields and Coupon Rates

AACSB:  3 Analytical Thinking

LO:  6.3 Explain the relationship between the coupon rate and the yield to maturity.

14) Rogue Outfitters Inc. has outstanding $1,000 face value 12% coupon bonds that make semiannual payments, and have 8 years remaining to maturity. If the current price for these bonds is $1,274.35, what is the annualized yield to maturity?

  1. A) 7.81%
  2. B) 7.40%
  3. C) 6.12%
  4. D) 6.00%

Answer:  B

Explanation:  B) The answer is found through an iterative (trial and error) process using the bond pricing formula.

Bond Price = PMT ×  + ;

MODE = END, P/Y = 2, C/Y = 2

INPUT            16             ?             -1,274.35        60              1,000

KEY                 N             I/Y         PV                  PMT         FV

CPT                 7.40

Diff: 3

Topic:  6.3 Yields and Coupon Rates

AACSB:  3 Analytical Thinking

LO:  6.3 Explain the relationship between the coupon rate and the yield to maturity.

 

 

15) When the coupon rate is less than the yield to maturity, the bond sells for a premium over the par value.

Answer:  FALSE

Explanation:  When the coupon rate is less than the yield to maturity, the bond sells for a DISCOUNT TO the par value.

Diff: 1

Topic:  6.3 Yields and Coupon Rates

AACSB:  3 Analytical Thinking

LO:  6.3 Explain the relationship between the coupon rate and the yield to maturity.

 

16) If the par value of a bond is equal to the bond price, then we know the yield to maturity is equal to the coupon rate.

Answer:  TRUE

Diff: 1

Topic:  6.3 Yields and Coupon Rates

AACSB:  3 Analytical Thinking

LO:  6.3 Explain the relationship between the coupon rate and the yield to maturity.

 

17) If a bond is selling at a premium above the par value that means that the yield to maturity is greater than the coupon rate.

Answer:  FALSE

Explanation:  If a bond is selling at a premium above the par value that means that the yield to maturity is LESS than the coupon rate.

Diff: 1

Topic:  6.3 Yields and Coupon Rates

AACSB:  3 Analytical Thinking

LO:  6.3 Explain the relationship between the coupon rate and the yield to maturity.

18) Southern Transit Corporation has $1,000 par value, twenty-year, 6% annual coupon bonds, outstanding currently selling for $696.25. What is the yield to maturity on these bonds? Use a calculator for your answer.

Answer:  9.43%. FV = $1,000; PMT = $1,000 × .06% = $60; N = 20; PV = $696.25. CPT 1/Y to get 9.43%.

Diff: 3

Topic:  6.3 Yields and Coupon Rates

AACSB:  3 Analytical Thinking

LO:  6.3 Explain the relationship between the coupon rate and the yield to maturity.

 

19) Describe the relationship between the yield to maturity and the coupon rate of a bond.

Answer:  The coupon rate only tells a bond buyer what prevailing bond rates were when the bond was originally issued. Bond sellers have to make the coupon rate competitive with the market or the bond will not sell well. After the original bond sale, however, the only function of the coupon rate is to tell you what the annual payment is. The annual payment equals the coupon rate × par (face value). The yield to maturity (YTM), however, accounts for more than just the coupons, and it reflects all the other risks of the bond. The YTM is the market rate, and it changes continuously over time, unlike the coupon rate, which never changes (at least for fixed-rate bonds).

Diff: 3

Topic:  6.3 Yields and Coupon Rates

AACSB:  3 Analytical Thinking

LO:  6.3 Explain the relationship between the coupon rate and the yield to maturity.

 

 

6.4   Bond Ratings

 

1) Which of the following is NOT a category for rating classifications of bonds?

  1. A) Investment grade bonds
  2. B) American grade bonds
  3. C) Extremely speculative grade bonds
  4. D) Speculative grade bonds

Answer:  B

Diff: 1

Topic:  6.4 Bond Ratings

AACSB:  3 Analytical Thinking

LO:  6.4 Delineate bond ratings and why ratings affect bond prices.

 

2) As the rating of a bond increases (for example, from A, to AA, to AAA), it generally means that

  1. A) the credit rating increases, the default risk increases, and the required rate of return decreases.
  2. B) the credit rating increases, the default risk decreases, and the required rate of return increases.
  3. C) the credit rating increases, the default risk decreases, and the required rate of return decreases.
  4. D) the credit rating decreases, the default risk decreases, and the required rate of return decreases.

Answer:  C

Diff: 2

Topic:  6.4 Bond Ratings

AACSB:  3 Analytical Thinking

LO:  6.4 Delineate bond ratings and why ratings affect bond prices.

3) From 1980 to 2013, the default risk premium differential between Aaa-rated bonds and Aa-rated bonds has averaged between ________.

  1. A) 5 to 10 basis points
  2. B) 11 to 23 basis points
  3. C) 24 to 35 basis points
  4. D) 36 to 50 basis points

Answer:  C

Diff: 2

Topic:  6.4 Bond Ratings

AACSB:  3 Analytical Thinking

LO:  6.4 Delineate bond ratings and why ratings affect bond prices.

Hmwrk Questions:  * Taken from "Prepping for Exams" questions at the end of the chapter.

 

4) From 1980 to 2013, the default risk premium differential between Aaa-rated bonds and Baa-rated bonds has averaged between ________.

  1. A) 5 to 15 basis points
  2. B) 20 to 50 basis points
  3. C) 100 to 200 basis points
  4. D) 250 to 350 basis points

Answer:  C

Diff: 2

Topic:  6.4 Bond Ratings

AACSB:  3 Analytical Thinking

LO:  6.4 Delineate bond ratings and why ratings affect bond prices.

 

 

5) "Junk" bonds are a street name for ________ grade bonds.

  1. A) investment
  2. B) speculative
  3. C) extremely speculative
  4. D) speculative and investment

Answer:  B

Diff: 1

Topic:  6.4 Bond Ratings

AACSB:  3 Analytical Thinking

LO:  6.4 Delineate bond ratings and why ratings affect bond prices.

 

6) A basis point is ________.

  1. A) one-thousandth of a percentage point
  2. B) one percentage point
  3. C) one-tenth of a percentage point
  4. D) one-hundredth of a percentage point

Answer:  D

Diff: 1

Topic:  6.4 Bond Ratings

AACSB:  3 Analytical Thinking

LO:  6.4 Delineate bond ratings and why ratings affect bond prices.

7) Moody's has developed a corporate bond default-risk rating system using capital and lower case letters and numbers. Below are several examples of Moody's ratings. Which answer choice lists a collection of ratings for "high credit investment grade" bonds?

  1. A) Baa1, A1, A3
  2. B) Ba1, Baa2, Baa3
  3. C) Aa2, Aa3, A1
  4. D) Caa, Ca, C

Answer:  C

Diff: 2

Topic:  6.4 Bond Ratings

AACSB:  3 Analytical Thinking

LO:  6.4 Delineate bond ratings and why ratings affect bond prices.

 

8) According to bond rating agencies, a bond rated "AAA" has a higher probability of default than a bond with a "BBB" rating.

Answer:  FALSE

Explanation:  According to bond rating agencies, a bond rated "AAA" has a LOWER amount of default risk than a bond with a "BBB" rating.

Diff: 2

Topic:  6.4 Bond Ratings

AACSB:  3 Analytical Thinking

LO:  6.4 Delineate bond ratings and why ratings affect bond prices.

 

9) A higher bond rating usually means a lower yield.

Answer:  TRUE

Diff: 2

Topic:  6.4 Bond Ratings

AACSB:  3 Analytical Thinking

LO:  6.4 Delineate bond ratings and why ratings affect bond prices.

 

10) What type of risk is being rated when bond agencies assign ratings to outstanding debt? What are the two main reasons for having bond agencies rate bonds?

Answer:  Bond rating agencies assess default risk. Bonds are rated by agencies for two primary reasons. First, the agencies are able to provide reliable information to potential investors at a reasonable cost. Without this service, investors would have to develop the resources and expertise to properly access the creditworthiness of thousands of potential bond issuers. Second, from the bond issuer's perspective, issuers of bonds are seeking to send a reliable signal to the market about the firm's ability to meet the financial obligations of the bond issue. Accurate information and a reduction in uncertainty in the marketplace can help raise the price of a bond. Thus, rating agencies, in effect, help market the bond.

Diff: 2

Topic:  6.4 Bond Ratings

AACSB:  3 Analytical Thinking

LO:  6.4 Delineate bond ratings and why ratings affect bond prices.

6.5   Some Bond History and More Bond Features

 

1) The ________ is the written contract between the bond issuer and the bondholder.

  1. A) debenture
  2. B) sinking fund
  3. C) indenture
  4. D) corpus

Answer:  C

Diff: 1

Topic:  6.5 Some Bond History and More Bond Features

AACSB:  3 Analytical Thinking

LO:  6.5 Appreciate bond history and understand the rights and obligations of buyers and sellers of bonds.

 

2) ________ are always unsecured bonds.

  1. A) Mortgage bonds
  2. B) Debentures
  3. C) Callable bonds
  4. D) Junior debt bonds

Answer:  B

Diff: 1

Topic:  6.5 Some Bond History and More Bond Features

AACSB:  3 Analytical Thinking

LO:  6.5 Appreciate bond history and understand the rights and obligations of buyers and sellers of bonds.

 

3) When a company is in financial difficulty and cannot fully pay all of its creditors, the first lenders to be paid are the ________.

  1. A) stockholders
  2. B) sinking fund holders
  3. C) junior debtholders
  4. D) senior debtholders

Answer:  D

Diff: 2

Topic:  6.5 Some Bond History and More Bond Features

AACSB:  3 Analytical Thinking

LO:  6.5 Appreciate bond history and understand the rights and obligations of buyers and sellers of bonds.

 

4) Which of the following is NOT an example of a bond that contains an option feature?

  1. A) Callable bond
  2. B) Putable bond
  3. C) Convertible bond
  4. D) These are all examples of bonds with option features.

Answer:  D

Diff: 1

Topic:  6.5 Some Bond History and More Bond Features

AACSB:  3 Analytical Thinking

LO:  6.5 Appreciate bond history and understand the rights and obligations of buyers and sellers of bonds.

5) Espresso Petroleum Inc. has a contractual option to buy back, prior to maturity, bonds the firm issued five years ago. This is an example of what type of bond?

  1. A) Putable bond
  2. B) Callable bond
  3. C) Convertible bond
  4. D) Junior bond

Answer:  B

Diff: 2

Topic:  6.5 Some Bond History and More Bond Features

AACSB:  3 Analytical Thinking

LO:  6.5 Appreciate bond history and understand the rights and obligations of buyers and sellers of bonds.

 

6) With a bearer bond, whoever held it was entitled to the ________ and the ________.

  1. A) interest payments; principal
  2. B) dividend payments; principal
  3. C) interest payments; dividend payments
  4. D) interest payments; voting rights

Answer:  A

Diff: 1

Topic:  6.5 Some Bond History and More Bond Features

AACSB:  3 Analytical Thinking

LO:  6.5 Appreciate bond history and understand the rights and obligations of buyers and sellers of bonds.

 

7) When real property is used as collateral for a bond, it is termed a/an ________.

  1. A) debenture
  2. B) mortgaged security
  3. C) indenture
  4. D) senior bond

Answer:  B

Diff: 1

Topic:  6.5 Some Bond History and More Bond Features

AACSB:  3 Analytical Thinking

LO:  6.5 Appreciate bond history and understand the rights and obligations of buyers and sellers of bonds.

 

 

8) A sinking fund may be used for each of the following EXCEPT ________.

  1. A) to be held on to and used to pay off the principal at maturity
  2. B) to call in bonds early
  3. C) to buy back some of the bonds over time
  4. D) to be used to pay off other outstanding debt issues

Answer:  D

Diff: 2

Topic:  6.5 Some Bond History and More Bond Features

AACSB:  3 Analytical Thinking

LO:  6.5 Appreciate bond history and understand the rights and obligations of buyers and sellers of bonds.

9) Which of the following types of bonds may the issuer buy back before maturity?

  1. A) Callable bond
  2. B) Putable bond
  3. C) Convertible bond
  4. D) Zero-coupon bond

Answer:  A

Diff: 2

Topic:  6.5 Some Bond History and More Bond Features

AACSB:  3 Analytical Thinking

LO:  6.5 Appreciate bond history and understand the rights and obligations of buyers and sellers of bonds.

Hmwrk Questions:  * Taken from "Prepping for Exams" questions at the end of the chapter.

 

10) Which of the following types of bonds may the buyer sell back before maturity?

  1. A) Callable bond
  2. B) Putable bond
  3. C) Convertible bond
  4. D) Zero-coupon bond

Answer:  B

Diff: 2

Topic:  6.5 Some Bond History and More Bond Features

AACSB:  3 Analytical Thinking

LO:  6.5 Appreciate bond history and understand the rights and obligations of buyers and sellers of bonds.

 

11) When a bond is callable, the ability to call the bond is an option for ________.

  1. A) the bond issuer
  2. B) the bond purchaser
  3. C) a mutual decision between the issuer and the purchaser of the bond
  4. D) the trustee holding the bond

Answer:  A

Diff: 2

Topic:  6.5 Some Bond History and More Bond Features

AACSB:  3 Analytical Thinking

LO:  6.5 Appreciate bond history and understand the rights and obligations of buyers and sellers of bonds.

 

 

12) Which of the choices below is FALSE?

  1. A) When issuing a putable bond, the firm anticipates that interest rates will rise over the life of the bond.
  2. B) When issuing a callable bond, the firm anticipates that interest rates will fall over the life of the bond.
  3. C) When issuing a callable bond, the firm anticipates that interest rates will rise over the life of the bond.
  4. D) A putable bond is essentially the reverse of a callable bond.

Answer:  C

Diff: 2

Topic:  6.5 Some Bond History and More Bond Features

AACSB:  3 Analytical Thinking

LO:  6.5 Appreciate bond history and understand the rights and obligations of buyers and sellers of bonds.

13) The interest rate banks charge to their best customers is the ________ rate.

  1. A) variable
  2. B) prime
  3. C) discount
  4. D) federal funds

Answer:  B

Diff: 1

Topic:  6.5 Some Bond History and More Bond Features

AACSB:  3 Analytical Thinking

LO:  6.5 Appreciate bond history and understand the rights and obligations of buyers and sellers of bonds.

 

14) Bonds that pay interest tied to the earnings of the company are known as ________ bonds.

  1. A) income
  2. B) exotic
  3. C) floating rate
  4. D) variable earnings

Answer:  A

Diff: 1

Topic:  6.5 Some Bond History and More Bond Features

AACSB:  3 Analytical Thinking

LO:  6.5 Appreciate bond history and understand the rights and obligations of buyers and sellers of bonds.

Hmwrk Questions:  * Taken from "Prepping for Exams" questions at the end of the chapter.

 

15) A ________ is an unsecured bond, and most of the bonds sold today in the United States are of this type.

  1. A) mortgage bond
  2. B) debenture
  3. C) senior bond
  4. D) bond indenture

Answer:  B

Diff: 1

Topic:  6.5 Some Bond History and More Bond Features

AACSB:  3 Analytical Thinking

LO:  6.5 Appreciate bond history and understand the rights and obligations of buyers and sellers of bonds.

 

 

16) Exotic bonds are ________ difficult to price than ordinary bonds and they attract ________ potential buyers.

  1. A) more; more
  2. B) less; more
  3. C) more; fewer
  4. D) less; fewer

Answer:  C

Diff: 1

Topic:  6.5 Some Bond History and More Bond Features

AACSB:  3 Analytical Thinking

LO:  6.5 Appreciate bond history and understand the rights and obligations of buyers and sellers of bonds.

17) An indenture is an unsecured bond, and most of the bonds sold today in the United States are of this type.

Answer:  FALSE

Explanation:  A DEBENTURE is an unsecured bond, and most of the bonds sold today in the United States are of this type.

Diff: 1

Topic:  6.5 Some Bond History and More Bond Features

AACSB:  3 Analytical Thinking

LO:  6.5 Appreciate bond history and understand the rights and obligations of buyers and sellers of bonds.

 

18) A callable bond allows the bond issuer to "call-in" the bond prior to maturity.

Answer:  TRUE

Diff: 1

Topic:  6.5 Some Bond History and More Bond Features

AACSB:  3 Analytical Thinking

LO:  6.5 Appreciate bond history and understand the rights and obligations of buyers and sellers of bonds.

 

19) A putable bond allows the bond issuer to "call-in" the bond prior to maturity.

Answer:  FALSE

Explanation:  A putable bond gives the bondholder the right to sell the bond back to the company at a predetermined price prior to maturity.

Diff: 1

Topic:  6.5 Some Bond History and More Bond Features

AACSB:  3 Analytical Thinking

LO:  6.5 Appreciate bond history and understand the rights and obligations of buyers and sellers of bonds.

 

 

20) Callable and putable bonds add options to an ordinary bond. These options may be exercised at the discretion of the bondholder in one type, or the bond issuer in the other. Describe callable and putable bonds. In your description, be sure to include which party has the option to exercise, and the impact of the option on the price of the bond.

Answer:  Callable bonds provide an option to the bond issuer to "call in" the bond prior to maturity at a contractually agreed-upon price during specific time periods. The bond issuer would exercise such an option when interest rates are falling so that debt can be reissued at a lower cost. Thus the price of a callable bond is lower than an otherwise equal bond without the call option attached.

 

Putable bonds provide an option to the bondholder to sell the bond back to the issuer prior to maturity at a contractually agreed-upon price during specific time periods. The bondholder would exercise such an option when interest rates are rising. Thus the price of a putable bond is higher than an otherwise equal bond without the put option attached.

Diff: 3

Topic:  6.5 Some Bond History and More Bond Features

AACSB:  3 Analytical Thinking

LO:  6.5 Appreciate bond history and understand the rights and obligations of buyers and sellers of bonds.

6.6   U.S. Government Bonds

 

1) Which of the following are issued with the shortest time to maturity?

  1. A) Treasury bills
  2. B) Treasury notes
  3. C) Treasury bonds
  4. D) Treasury stocks

Answer:  A

Diff: 1

Topic:  6.6 U.S. Government Bonds

AACSB:  3 Analytical Thinking

LO:  6.6 Price government bonds, notes, and bills.

 

2) Treasury ________ and ________ are semiannual bonds, while Treasury ________ are zero-coupon instruments.

  1. A) bills; bonds; notes
  2. B) notes; bills; bonds
  3. C) notes; bonds; bills
  4. D) bonds; bills; notes

Answer:  C

Diff: 2

Topic:  6.6 U.S. Government Bonds

AACSB:  3 Analytical Thinking

LO:  6.6 Price government bonds, notes, and bills.

 

 

3) A U.S. Treasury bill is currently selling at a discount basis of 4.25%. The par value of the bill is $100,000, and will mature in ninety days. What is the price of this Treasury bill?

  1. A) $95,750.00
  2. B) $98,937.50
  3. C) $98,952.05
  4. D) $99,952.78

Answer:  B

Explanation:  B) Price = face value × [1 - (discount rate × )]

= $100,000 × [1 - (.0425 × 90/360)] = $98,937.50

Diff: 1

Topic:  6.6 U.S. Government Bonds

AACSB:  3 Analytical Thinking

LO:  6.6 Price government bonds, notes, and bills.

4) A U.S. Treasury bill is currently selling at a discount basis of 2.25%. The par value of the bill is $100,000, and will mature in 180 days. What is the price of this Treasury bill?

  1. A) $98,875.00
  2. B) $98,937.50
  3. C) $98,975.00
  4. D) $99,500.00

Answer:  A

Explanation:  A) Price=face value × [1 - (discount rate × )]

= $100,000 × [1 - (.0225 × 180/360)] = $98,875.00

Diff: 1

Topic:  6.6 U.S. Government Bonds

AACSB:  3 Analytical Thinking

LO:  6.6 Price government bonds, notes, and bills.

 

5) A U.S. Treasury bill is currently selling at a discount basis of 0.25%. The par value of the bill is $100,000 and will mature in thirty days. What is the price of this Treasury bill?

  1. A) $98,850.25
  2. B) $99,830.00
  3. C) $99,875.00
  4. D) $99,979.17

Answer:  D

Explanation:  D) Price = face value × [1 - (discount rate × )]

= $100,000 × [1 - (.0025 × 30/360)] = $99,979.17

Diff: 1

Topic:  6.6 U.S. Government Bonds

AACSB:  3 Analytical Thinking

LO:  6.6 Price government bonds, notes, and bills.

 

 

6) The Department of the Treasury offers three types of "bonds" for sale: Treasury bills, Treasury munis, and Treasury bonds.

Answer:  FALSE

Explanation:  The Department of the Treasury offers Treasury bills, Treasury NOTES, and Treasury bonds for sale.

Diff: 1

Topic:  6.6 U.S. Government Bonds

AACSB:  3 Analytical Thinking

LO:  6.6 Price government bonds, notes, and bills.

 

7) Treasury notes and bonds are zero-coupon bonds that sell at a discount while Treasury bills have coupon payments.

Answer:  FALSE

Explanation:  Treasury notes and bonds are COUPON bonds while Treasury bills are zero-coupon securities that sell at a discount.

Diff: 1

Topic:  6.6 U.S. Government Bonds

AACSB:  3 Analytical Thinking

LO:  6.6 Price government bonds, notes, and bills.

8) Describe the three types of financial instruments issued by the U.S. Department of the Treasury.

Answer:  The U.S. Department of the Treasury issues three types of financial instruments:

  1. Treasury bills, with maturities of less than a year; these are zero-coupon instruments in that they pay both principal and interest at maturity only.
  2. Treasury notes, with maturities of between two and ten years; these are semiannual bonds.
  3. Treasury bonds, with maturities of more than ten years; these are also semiannual bonds.

Diff: 3

Topic:  6.6 U.S. Government Bonds

AACSB:  3 Analytical Thinking

LO:  6.6 Price government bonds, notes, and bills.

 

 

 

 

 

 

 

 

 

 

 -----

Key Contents: Financial Management and Corporate Finance
------
Financial Management: Core Concepts, 3rd Edition, 2016, Raymond Brooks, Oregon State University
Financial Management: Concepts and Applications, 2015, Stephen Foerster, Richard Ivey School of Business, University of Western Ontario
Financial Management: Principles and Applications, 12th Edition, 2015, Sheridan Titman, Arthur J. Keown
International Financial Management, 2nd Edition, 2012, Geert J Bekaert, Columbia University, Robert J. Hodrick, Columbia University
------
Corporate Finance, 4th Edition, 2017, Jonathan Berk, Stanford University, Peter DeMarzo, Stanford University
Corporate Finance: The Core, 4th Edition, 2017, Jonathan Berk, Stanford University, Peter DeMarzo, Stanford University
Excel Modeling in Corporate Finance, 5th Edition, 2015, Craig W. Holden, Indiana University
Fundamentals of Corporate Finance, 3rd Edition, 2015, Jonathan Berk, Stanford University, Peter DeMarzo, Stanford University, Jarrad Harford, University of Washington

-----

Fundamentals of Investing, 13th Edition, Scott B. Smart, Lawrence J. Gitman, Michael D. Joehnk, 2017
Multinational Business Finance, 14th Edition, David K. Eiteman, Arthur I. Stonehill, Michael H. Moffett, 2016
Personal Finance, 6th Edition, 2017, Jeff Madura, Emeritus Professor of Finance; Florida Atlantic University
Personal Finance: Turning Money into Wealth, 7th Edition, 2016, Arthur J. Keown, Virginia Polytechnic Instit. and State University
Foundations of Finance, 9th Edition, 2017, Arthur J. Keown, John H. Martin
Principles of Managerial Finance, 14th Edition, 2015, Lawrence J. Gitman, Chad J. Zutter
------
Part 1: Fundamental Concepts and Basic Tools of Finance
1. Financial Management
2. Financial Statements
3. The Time Value of Money (Part 1)
4. The Time Value of Money (Part 2)
5. Interest Rates
Part 2: Valuing Stocks and Bonds and Understanding Risk and Return
6. Financial Management Bonds and Bond Valuation
7. Stocks and Stock Valuation
8. Risk and Return
Part 3: Capital Budgeting
9: Capital Budgeting Decision Models
10: Cash Flow Estimation
11: The Cost of Capital
Part 4: Financial Planning and Evaluating Performance
12. Forecasting and Short-Term Financial Planning
13. Working Capital Management
14. Financial Ratios and Firm Performance
Part 5: Other Selected Finance Topics
15. Raising Capital
16. Capital Structure
17. Dividends, Dividend Policy, and Stock Splits
18. International Financial Management
Appendix 1 Future Value Interest Factors
Appendix 2 Present Value Interest Factors
Appendix 3 Future Value Interest Factors of an Annuity
Appendix 4 Present Value Interest Factors of an Annuity
Appendix 5 Answers to Prepping for Exam Questions
------
1. Overview of Financial Management
2. Sizing Up a Business: A Non-Financial Perspective
3. Understanding Financial Statements
4. Measuring Financial Performance
5. Managing Day-To-Day Cash Flow
6. Projecting Financial Requirements and Managing Growth
7. Time Value of Money Basics and Applications
8. Making Investment Decisions
9. Overview of Capital Markets: Long-Term Financing Instruments
10. Assessing the Cost of Capital: What Investors Require
11. Understanding Financing and Payout Decisions
12. Designing an Optimal Capital Structure
13. Measuring and Creating Value
14. Comprehensive Case Study: Wal-Mart Stores, Inc.

1. Overview of Financial Management
• 1.1: Financial Management and the Cash Flow Cycle
• 1.2: The Role of Financial Managers
• 1.3: A Non-Financial Perspective of Financial Management
• 1.4: Financial Management’s Relationship with Accounting and Other Disciplines
• 1.5: Types of Firms
• 1.6: A Financial Management Framework
• 1.7: Relevance for Managers
• 1.8: Summary
• 1.9: Additional Readings
• 1.10: End of Chapter Problems
2. Sizing Up a Business: A Non-Financial Perspective
• 2.1: Sizing Up The Overall Economy
o 2.1.1: GDP Components
o 2.1.2: Sector-Related Fluctuations
o 2.1.3: Inflation and Interest Rates
o 2.1.4: Capital Markets
o 2.1.5: Economic Size-Up Checklist
• 2.2: Sizing Up the Industry
o 2.2.1: Industry Life Cycles
o 2.2.2: The Competitive Environment
o 2.2.3: Opportunities and Risks
o 2.2.4: Industry Size-up Checklist
• 2.3: Sizing Up Operations Management and Supply Risk
• 2.4: Sizing Up Marketing Management and Demand Risk
• 2.5: Sizing Up Human Resource Management and Strategy
• 2.6: Sizing Up Home Depot: An Example
• 2.7: Relevance for Managers
• 2.8 Summary
• 2.9: Additional Readings and Information
• 2.10: End of Chapter Problems
3. Understanding Financial Statements
• 3.1: Understanding Balance Sheets
o 3.1.1: Understanding Assets
o 3.1.2: Understanding Liabilities
o 3.1.3: Understanding Equity
• 3.2: Understanding Income Statements
o 3.2.1: Understanding Revenues, Costs, Expenses, and Profits
o 3.2.2: Connecting a Firm’s Income Statement and Balance Sheet
• 3.3: Understanding Cash Flow Statements
o 3.3.1: Cash Flows Related to Operating Activities
o 3.3.2: Cash Flows from Investing Activities
o 3.3.3: Cash Flows from Financing Activities
• 3.4: Relevance for Managers
• 3.5: Summary
• 3.6: Additional Readings and Sources of Information
• 3.7: End of Chapter Problems
4. Measuring Financial Performance
• 4.1: Performance Measures
o 4.1.1: Return on Equity
o 4.1.2: Profitability Measures
o 4.1.3: Resource Management Measures
o 4.1.4: Liquidity Measures
o 4.1.5: Leverage Measures
o 4.1.6: Application: Home Depot
• 4.2: Reading Annual Reports
• 4.3: Relevance for Managers
• 4.4: Summary
• 4.5: Additional Readings and Sources of Information
• 4.6: End of Chapter Problems
5. Managing Day-To-Day Cash Flow
• 5.1: Cash Flow Cycles
• 5.2: Working Capital Management
o 5.2.1: Managing Inventory
o 5.2.2: Managing Accounts Receivable
o 5.2.3: Managing Accounts Payable
o 5.2.4: Application: Home Depot
• 5.2.4.1: Orange Computers and Little Orange Computers
• 5.2.4.2: Home Depot
• 5.3: Short-Term Financing
o 5.3.1: Bank Loans
o 5.3.2: Commercial Paper
o 5.3.3: Banker’s Acceptance
• 5.4: Relevance for Managers
• 5.5: Summary
• 5.6: Additional Readings
• 5.7: End of Chapter Problems

6. Projecting Financial Requirements and Managing Growth
• 6.1: Generating Pro Forma Income Statements
o 6.1.1: Establishing the Cost of Goods Sold and Gross Profit
o 6.1.2: Establishing Expenses
o 6.1.3: Establishing Earnings
• 6.2: Generating Pro Forma Balance Sheets
o 6.2.1: Establishing Assets
o 6.2.2: Establishing Liabilities and Equity
• 6.3: Generating Pro Forma Cash Budgets
o 6.3.1: Establishing Cash Inflows
o 6.3.2: Establishing Cash Outflows
o 6.3.3: Establishing Net Cash Flows
• 6.4: Performing Sensitivity Analysis
o 6.4.1: Sales Sensitivity
o 6.4.1: Interest Rate Sensitivity
o 6.4.3: Working Capital Sensitivity
• 6.5: Understanding Sustainable Growth and Managing Growth
• 6.6: Relevance for Managers
• 6.7: Summary
• 6.8: Additional Readings and Resources
• 6.9: Problems

7. Time Value of Money Basics and Applications
• 7.1: Exploring Time Value of Money Concepts
o 7.1.1: Future Values
o 7.1.2: Present Values
o 7.1.3: Annuities
o 7.1.4: Perpetuities
• 7.2: Applying Time Value of Money Concepts to Financial Securities
o 7.2.1: Bonds
o 7.2.2: Preferred Shares
o 7.2.3: Common Equity
• 7.3: Relevance for Managers
• 7.4: Summary
• 7.5: Additional Readings
• 7.6: End of Chapter Problems

8. Making Investment Decisions
• 8.1: Understanding the Decision-Making Process
• 8.2: Capital Budgeting Techniques
o 8.2.1: Payback
• 8.2.1.1: Strengths and Weaknesses of the Payback Method
o 8.2.2: Net Present Value
• 8.2.2.1: Strengths and Weaknesses of the Net Present Value Method
o 8.2.3: Internal Rate of Return
• 8.2.3.1: Strengths and Weaknesses of the Internal Rate of Return Method
• 8.2.3.2: Modified Internal Rate of Return
• 8.3: Capital Budgeting Extensions
o 8.3.1: Profitability Index
o 8.3.2: Equivalent Annual Cost and Project Lengths
o 8.3.3: Mutually Exclusive Projects and Capital Rationing
• 8.4: Relevance for Managers
• 8.5: Summary
• 8.6: Additional Readings
• 8.7: End of Chapter Problems

9. Overview of Capital Markets: Long-Term Financing Instruments
• 9.1: Bonds
o 9.1.1: Changing Bond Yields
o 9.1.2: Bond Features
o 9.1.3: Bond Ratings
• 9.2: Preferred Shares
• 9.3: Common Shares
o 9.3.1: Historical Returns
• 9.4: Capital Markets Overview
o 9.4.1: Private versus Public Markets
o 9.4.2: Venture Capital and Private Equity
o 9.4.3: Initial Offerings versus Seasoned Issues
o 9.4.4: Organized Exchanges versus Over-The-Counter Markets
o 9.4.5: Role of Intermediaries
• 9.5: Market Efficiency
o 9.5.1: Weak Form
o 9.5.2: Semi-strong Form
o 9.5.3: Strong Form
o 9.5.4: U.S. Stock Market Efficiency
• 9.6: Relevance for Managers
• Appendix: Understanding Bond and Stock Investment Information
• 9.7: Summary
• 9.8: Additional Readings
• 9.9: End of Chapter Problems

10. Assessing the Cost of Capital: What Investors Require
• 10.1: Understanding the Cost of Capital: An Example
• 10.2: Understanding the Implications of the Cost of Capital
• 10.3: Defining Risk
• 10.4: Estimating the Cost of Debt
• 10.5: Estimating the Cost of Preferred Shares
• 10.6: Estimating the Cost of Equity
o 10.6.1: Dividend Model Approach
o 10.6.2: Capital Asset Pricing Model
• 10.6.2.1: Risk-Free Rate
• 10.6.2.2: Market Risk Premium
• 10.6.2.3: Beta
• 10.7: Estimating Component Weights
• 10.8: Home Depot Application
• 10.9: Hurdle Rates
• 10.10: Relevance for Managers
• 10.11: Summary
• 10.12: Additional Readings
• 10.13: Problems
11. Understanding Financing and Payout Decisions
• 11.1: Capital Structure Overview
• 11.2: Understanding the Modigliani-Miller Argument: Why Capital Structure Does Not Matter
• 11.3: Relaxing the Assumptions: Why Capital Structure Does Matter
o 11.3.1: Understanding the Impact of Corporate Taxes
o 11.3.2: Understanding the Impact of Financial Distress
o 11.3.3: Combining Corporate Taxes and Financial Distress Costs
o 11.3.4: Impact of Asymmetric Information
• 11.4: Understanding Payout Policies
o 11.4.1: Paying Dividends
o 11.4.2: Repurchasing Shares
o 11.4.3: Do Dividend Policies Matter?
• 11.5: Relevance for Managers
• 11.6: Summary
• 11.7: Additional Resources
• 11.8: End of Chapter Problems
• Appendix: Why Dividend Policy Doesn’t Matter: Example

12. Designing an Optimal Capital Structure
• 12.1: Factor Affecting Financing Decisions: The FIRST Approach
o 12.1.1: Maximizing Flexibility
o 12.1.2: Impact on EPS: Minimizing Cost
• 12.1.2.1: A Simple Valuation Model
• 12.1.2.2: Earnings before Interest and Taxes Break-Even: What Leverage Really Means
• 12.1.2.3: Does Issuing Equity Dilute the Value of Existing Shares?
o 12.1.3: Minimizing Risk
o 12.1.4: Maintaining Shareholder Control
o 12.1.5: Optimal Training
• 12.2: Tradeoff Assessment: Evaluating FIRST Criteria
• 12.3: Relevance for Managers
• 12.4: Summary
• 12.5: Additional Resource
• 12.6: End of Chapter Problems

13. Measuring and Creating Value
• 13.1: An Overview of Measuring and Creating Value
• 13.2: Measuring Value: The Book Value Plus Adjustments Method
o 13.2.1: Pros and Cons of the Book Value of Equity Plus Adjustments Method
• 13.3: Measuring Value: The Discount Cash Flow Analysis Method
o 13.3.1: Estimating Free Cash Flows
o 13.3.2: Estimating the Cost of Capital
o 13.3.3: Estimating the Present Value of Free Cash Flows
o 13.3.4: Estimating the Terminal Value
o 13.3.5: Estimating the Value of Equity
o 13.3.6: Pros and Cons of the Free Cash Flow to the Firm Approach
• 13.4: Measuring Value: Relative Valuations and Comparable Analysis
o 13.4.1: The Price-Earnings Method
• 13.4.1.1: Pros and Cons of the Price-Earnings Approach
o 13.4.2: The Enterprise Value-to-EBITDA Method
• 13.4.2.1: Pros and Cons of the EV/EBITDA Approach
• 13.5: Creating Value and Value-Based Management
• 13.6: Valuing Mergers and Acquisitions
o 13.6.1: Valuing Comparable M&A Transactions
• 13.7: Relevance for Managers
• 13.8: Summary
• 13.9: Additional Readings
• 13.10: End of Chapter Problems

14. Comprehensive Case Study: Wal-Mart Stores, Inc.
• 14.1: Sizing Up Wal-Mart
o 14.1.1: Analyzing the Economy
o 14.1.2: Analyzing the Industry
o 14.1.3: Analyzing Walmart’s Strengths and Weaknesses in Operations, Marketing, Management, and Strategy
• 14.1.3.1: Analyzing Walmart’s Operations
• 14.1.3.2: Analyzing Walmart’s Marketing
• 14.1.3.3: Analyzing Walmart’s Management and Strategy
o 14.1.4: Analyzing Walmart’s Financial Health
• 14.2: Projecting Walmart’s Future Performance
o 14.2.1: Projecting Walmart’s Income Statement
o 14.2.2: Projecting Walmart’s Balance Sheet
o 14.2.3: Examining Alternate Scenarios
• 14.3: Assessing Walmart’s Long-Term Investing and Financing
o 14.3.1: Assessing Walmart’s Investments
o 14.3.2: Assessing Walmart’s Capital Raising and the Cost of Capital
• 14.4: Valuing Walmart
o 14.4.1: Measuring Walmart’s Economic Value Added
o 14.4.2: Estimating Walmart’s Intrinsic Value: The DCF Approach
o 14.4.3: Estimating Walmart’s Intrinsic Value: Comparable Analysis
o 14.4.4: Creating Value and Overall Assessment of Walmart
• 14.5: Relevance for Managers and Final Comments
• 14.6: Additional Readings and Sources of Information
• 14.7: End of Chapter Problems
------
Part 1: Introduction to Financial Management
Chapter 1: Getting Started - Principles of Finance
Chapter 2: Firms and the Financial Market
Chapter 3: Understanding Financial Statements, Taxes, and Cash Flows
Chapter 4: Financial Analysis - Sizing Up Firm Performance
Part 2: Valuation of Financial Assets
Chapter 5: Time Value of Money - The Basics
Chapter 6: The Time Value of Money - Annuities and Other Topics
Chapter 7: An Introduction to Risk and Return - History of Financial Market Returns
Chapter 8: Risk and Return - Capital Market Theory
Chapter 9: Debt Valuation and Interest Rates
Chapter 10: Stock Valuation
Part 3: Capital Budgeting
Chapter 11: Investment Decision Criteria
Chapter 12: Analyzing Project Cash Flows
Chapter 13: Risk Analysis and Project Evaluation
Chapter 14: The Cost of Capital
Part 4: Capital Structure & Dividend Policy
Chapter 15: Capital Structure Policy
Chapter 16: Dividend Policy
Part 5: Liquidity Management & Special Topics in Finance
Chapter 17: Financial Forecasting and Planning
Chapter 18: Working Capital Management
Chapter 19: International Business Finance
Chapter 20: Corporate Risk Management
------
PART I: INTRODUCTION TO FOREIGN EXCHANGE MARKETS AND RISKS
Chapter 1: Globalization and the Multinational Corporation
Chapter 2: The Foreign Exchange Market
Chapter 3: Forward Markets and Transaction Exchange Risk
Chapter 4: The Balance of Payments
Chapter 5: Exchange Rate Systems
PART II: INTERNATIONAL PARITY CONDITIONS AND EXCHANGE RATE DETERMINATION
Chapter 6: Interest Rate Parity
Chapter 7: Speculation and Risk in the Foreign Exchange Market
Chapter 8: Purchasing Power Parity and Real Exchange Rates
Chapter 9: Measuring and Managing Real Exchange Risk
Chapter 10: Exchange Rate Determination and Forecasting

PART III: INTERNATIONAL CAPITAL MARKETS
Chapter 11: International Debt Financing
Chapter 12: International Equity Financing
Chapter 13: International Capital Market Equilibrium
Chapter 14: Political and Country Risk

PART IV: INTERNATIONAL CORPORATE FINANCE
Chapter 15: International Capital Budgeting
Chapter 16: Additional Topics in International Capital Budgeting
Chapter 17: Risk Management and the Foreign Currency Hedging Decision
Chapter 18: Financing International Trade
Chapter 19: Managing Net Working Capital

PART V: FOREIGN CURRENCY DERIVATIVES
Chapter 20: Foreign Currency Futures and Options
Chapter 21: Interest Rate and Foreign Currency Swaps
------
PART 1: INTRODUCTION
1. The Corporation
2. Introduction to Financial Statement Analysis
3. Financial Decision Making and the Law of One Price
PART 2: TIME, MONEY, AND INTEREST RATES
4. The Time Value of Money
5. Interest Rates
6. Valuing Bonds
PART 3: VALUING PROJECTS AND FIRMS
7. Investment Decision Rules
8. Fundamentals of Capital Budgeting
9. Valuing Stocks
PART 4: RISK AND RETURN
10. Capital Markets and the Pricing of Risk
11. Optimal Portfolio Choice and the Capital Asset Pricing Model
12. Estimating the Cost of Capital
13. Investor Behavior and Capital Market Efficiency
PART 5: CAPITAL STRUCTURE
14. Capital Structure in a Perfect Market
15. Debt and Taxes
16. Financial Distress, Managerial Incentives, and Information
17. Payout Policy
PART 6: ADVANCED VALUATION
18. Capital Budgeting and Valuation with Leverage
19. Valuation and Financial Modeling: A Case Study
PART 7: OPTIONS
20. Financial Options
21. Option Valuation
22. Real Options

PART 8: LONG-TERM FINANCING
23. Raising Equity Capital
24. Debt Financing
25. Leasing
PART 9: SHORT-TERM FINANCING
26. Working Capital Management
27. Short-Term Financial Planning
PART 10: SPECIAL TOPICS
28. Mergers and Acquisitions
29. Corporate Governance
30. Risk Management
31. International Corporate Finance
------
PART 1: INTRODUCTION
1. The Corporation
2. Introduction to Financial Statement Analysis
3. Financial Decision Making and the Law of One Price
PART 2: TIME, MONEY, AND INTEREST RATES
4. The Time Value of Money
5. Interest Rates
6. Valuing Bonds
PART 3: VALUING PROJECTS AND FIRMS
7. Investment Decision Rules
8. Fundamentals of Capital Budgeting
9. Valuing Stocks
PART 4: RISK AND RETURN
10. Capital Markets and the Pricing of Risk
11. Optimal Portfolio Choice and the Capital Asset Pricing Model
12. Estimating the Cost of Capital
13. Investor Behavior and Capital Market Efficiency
PART 5: CAPITAL STRUCTURE
14. Capital Structure in a Perfect Market
15. Debt and Taxes
16. Financial Distress, Managerial Incentives, and Information
17. Payout Policy
PART 6: ADVANCED VALUATION
18. Capital Budgeting and Valuation with Leverage
19. Valuation and Financial Modeling: A Case Study
------
------
PART 1 INTRODUCTION
Chapter 1 Corporate Finance and the Financial Manager
Chapter 2 Introduction to Financial Statement Analysis
PART 2 INTEREST RATES AND VALUING CASH FLOWS
Chapter 3 Time Value of Money: An Introduction
Chapter 4 Time Value of Money: Valuing Cash Flow Streams
Chapter 5 Interest Rates
Chapter 6 Bonds
Chapter 7 Stock Valuation
PART 3 VALUATION AND THE FIRM
Chapter 8 Investment Decision Rules
Chapter 9 Fundamentals of Capital Budgeting
Chapter 10 Stock Valuation: A Second Look
PART 4 RISK AND RETURN
Chapter 11 Risk and Return in Capital Markets
Chapter 12 Systematic Risk and the Equity Risk Premium
Chapter 13 The Cost of Capital
PART 5 LONG-TERM FINANCING
Chapter 14 Raising Equity Capital
Chapter 15 Debt Financing
PART 6 CAPITAL STRUCTURE AND PAYOUT POLICY
Chapter 16 Capital Structure
Chapter 17 Payout Policy
PART 7 FINANCIAL PLANNING AND FORECASTING
Chapter 18 Financial Modeling and Pro Forma Analysis
Chapter 19 Working Capital Management
Chapter 20 Short-Term Financial Planning
PART 8 Special Topics
Chapter 21 Option Applications and Corporate Finance
Chapter 22 Mergers and Acquisitions
Chapter 23 International Corporate Finance  

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FINANCIAL MANAGEMENT AND CORPORATE FINANCE - COLLECTION 2017 (FREE DOWNLOAD)

Financial Management: Core Concepts, 3rd Edition, 2016, Raymond Brooks, Oregon State University
Free download - PPT - Link
Free donwload - PPT - Link


Financial Management: Concepts and Applications, 2015, Stephen Foerster, Richard Ivey School of Business
Free download - PPT - Link

International Financial Management, 2nd Edition, 2012, Geert J Bekaert, Columbia University, Robert J. Hodrick
Free download - PPT 1 - Link
Free download - PPT 2 - Link

Corporate Finance, 4th Edition, 2017, Jonathan Berk, Stanford University, Peter DeMarzo, Stanford University
Free download - PPT 1 - Link
Free download - PPT 2 - Link
Free download - PPT 3 - Link

Free download Link - Core 4

Excel Modeling in Corporate Finance, 5th Edition, 2015, Craig W. Holden, Indiana University
Fundamentals of Corporate Finance, 3rd Edition, 2015, Jonathan Berk, Stanford University, Peter DeMarzo, 
Financial Management: Principles and Applications, 12th Edition, 2015, Sheridan Titman, Arthur J. Keown

 

Fundamentals of Investing, 13th Edition, Scott B. Smart, Lawrence J. Gitman, Michael D. Joehnk, 2017
Free download - PPT  - Link


Multinational Business Finance, 14th Edition, David K. Eiteman, Arthur I. Stonehill, Michael H. Moffett, 2016
Free download - PPT  - Link


Personal Finance, 6th Edition, 2017, Jeff Madura, Emeritus Professor of Finance; Florida Atlantic University
Free download - PPT  - Link


Personal Finance: Turning Money into Wealth, 7th Edition, 2016, Arthur J. Keown, 
Free download - PPT  - Link


Foundations of Finance, 9th Edition, 2017, Arthur J. Keown, John H. Martin
Free download - PPT  - Link


Principles of Managerial Finance, 14th Edition, 2015, Lawrence J. Gitman, Chad J. Zutter
 Free download - PPT  - Link

 

DOWNLOAD ALL TEST BANKs & CASE STUDY GUIDES - 2017

Corporate Finance, 4th Edition, 2017, Jonathan Berk, Stanford University, Peter DeMarzo, Stanford University - Test bank

Financial Management: Concepts and Applications, 2015, Stephen Foerster, Richard Ivey School of Business - Test bank

Financial Management: Core Concepts, 3rd Edition, 2016, Raymond Brooks, Oregon State University - Test bank

International Financial Management, 2nd Edition, 2012, Geert J Bekaert, Columbia University, Robert J. Hodrick - Test bank

Financial Management: Principles and Applications, 12th Edition, 2015, Sheridan Titman, Arthur J. Keown - Test bank

Corporate Finance: The Core, 4th Edition, 2017, Jonathan Berk, Stanford University, Peter DeMarzo - Test bank

Fundamentals of Investing, 13th Edition, Scott B. Smart, Lawrence J. Gitman, Michael D. Joehnk, 2017 - Test bank

Multinational Business Finance, 14th Edition, David K. Eiteman, Arthur I. Stonehill, Michael H. Moffett, 2016 - Test bank

Personal Finance, 6th Edition, 2017, Jeff Madura, Emeritus Professor of Finance; Florida Atlantic University - Test bank

Personal Finance: Turning Money into Wealth, 7th Edition, 2016, Arthur J. Keown - Test bank

Foundations of Finance, 9th Edition, 2017, Arthur J. Keown, John H. Martin - Test bank

Principles of Managerial Finance, 14th Edition, 2015, Lawrence J. Gitman, Chad J. Zutter - Test bank

 

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For Test Bankz, Quiz Answers and Case study Guides, email to: This email address is being protected from spambots. You need JavaScript enabled to view it.

All Free downloads - LINK

 

Good Luck and Success, Enjoy Your Study !

 

 

 

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