FIN 370 Week 3 Practice: Week 3 Knowledge Check

Complete the Week 3 “Knowledge Check” in Connect®.

Note: You have unlimited attempts available to complete this practice assignment. The highest scored attempt will be recorded. These assignments have earlier due dates, so plan accordingly. Grades must be transferred manually to eCampus by your instructor. Don’t worry, this might happen after your due date.

MC Qu. 7-67 Which of the following is NOT…

Which of the following is NOT true about EE savings bonds?

Multiple Choice

These are tax deferred investments.

Interest payments are received annually but are tax deductible.

About one in six Americans owns a savings bond.

Paper bonds sell for one-half of their face value.

MC Qu. 7-4 Which of the following is a legal…

Which of the following is a legal contract that outlines the precise terms between the issuer and the bondholder?

Multiple Choice

Prospectus

Enforcement codes

Debenture

Indenture

MC Qu. 7-125 A 4.15 percent TIPS has an…

A 4.15 percent TIPS has an original reference CPI of 182.1. If the current CPI is 188.3, what is the par value of the TIPS?

Multiple Choice

$1,000.00

$1,004.75

$967.07

$1,034.05

MC Qu. 7-124 A 2.95 percent TIPS has an…

A 2.95 percent TIPS has an original reference CPI of 180.2. If the current CPI is 205.1, what is the current interest payment and par value of the TIPS? (Assume semi-annual interest payments and $1,000 par value.)

Multiple Choice

$878.60, $16.79, respectively

$1,000.00, $29.50, respectively

$1,138.18, $29.50, respectively

$1,138.18, $16.79, respectively

MC Qu. 7-81 A 5.125 percent TIPS has an…

A 5.125 percent TIPS has an original reference CPI of 191.8. If the current CPI is 188.3, what is the par value of the TIPS?

Multiple Choice

$992.75

$981.75

$1,018.60

$1,042.95

MC Qu. 7-38 Calculate the price of a zero…

Calculate the price of a zero coupon bond that matures in 10 years if the market interest rate is 6 percent. (Assume semi-annual compounding and $1,000 par value.)

Multiple Choice

$1,000.00

$553.68

$558.66

$940.00

MC Qu. 7-18 Which of the following terms means…

Which of the following terms means the chance that future interest payments will have to be reinvested at a lower interest rate?

Multiple Choice

Credit quality risk

Interest rate risk

Reinvestment rate risk

Liquidity rate risk

MC Qu. 7-43 What’s the taxable equivalent yield on a municipal…

What’s the taxable equivalent yield on a municipal bond with a yield to maturity of 3.9 percent for an investor in the 35 percent marginal tax bracket?

Multiple Choice

1.09%

6.00%

11.14%

3.90%

MC Qu. 7-21 Which of the following is an…

Which of the following is an important advantage to the issuer of a bond with a call provision?

Multiple Choice

They allow for refinancing opportunities.

They are able to avoid reinvestment rate risk.

They are able to avoid interest rate risk.

They are able to reduce their credit risk.

Which of the following are backed only by the reputation and financial stability of the corporation?

Multiple Choice

Both debentures and unsecured bonds

Debentures

None of the options

Unsecured bonds

Which of the following terms is the chance that the bond issuer will not be able to make timely payments?

Multiple Choice

Interest rate risk

Liquidity of interest rate risk

Term structure of interest rates

Credit quality risk

As residual claimants, which of these investors claim any cash flows to the firm that remain after the firm pays all other claims?

rev: 07_10_2017_QC_CS-93259

Multiple Choice

preferred stockholders

creditors

common stockholders

bondholders

All of the following are stock market indices EXCEPT:

Multiple Choice

Dow Jones Industrial Average.

Standard & Poor’s 500 Index.

Nasdaq Composite Index.

Mercantile 1000.

You would like to sell 400 shares of International Business Machines (IBM). The current bid and ask quotes are $96.24 and $96.17, respectively. You place a limit sell-order at $96.20. If the trade executes, how much money do you receive from the buyer?

Multiple Choice

$38,464.00

$38,496.00

$38,468.00

$38,480.00

Investors sell stock at the:

Multiple Choice

dealer price.

broker price.

bid price.

quoted ask price.

At your discount brokerage firm, it costs $9.95 per stock trade. How much money do you need to buy 100 shares of Ralph Lauren (RL), which trades at $85.13?

Multiple Choice

$8,503.05

$8,503.00

$9,508.00

$8,522.95

A preferred stock from DLC pays $5.10 in annual dividends. If the required return on the preferred stock is 12.1 percent, what is the value of the stock?

Multiple Choice

$42.15

$47.25

$240.97

$6.31

At your discount brokerage firm, it costs $10.50 per stock trade. How much money do you need to buy 100 shares of Apple (AAPL), which trades at $202.64?

Multiple Choice

$21,314.00

$20,274.50

$20,253.50

In

$20,264.00

JPM has earnings per share of $3.75 and P/E of 47. What is the stock price?

Multiple Choice

$185.95

$174.08

$112.98

$176.25

Pfizer, Inc. (PFE) has earnings per share of $2.09 and a P/E ratio of 11.02. What is the stock price?

Multiple Choice

$18.97

$5.27

$23.03

$0.19