11. Companies E and P each reported the same earnings per share (EPS),

QUESTION

11. Companies E and P each reported the same earnings per share (EPS), but Company Es stock trades at a higher price. Which of the following statements is CORRECT?A) Company E probably has fewer growth opportunities.B) Company E is probably judged by investors to be riskier.C) Company E must
11. EPS = Earnings avalible to shareholders/No of shareholders. E) is correct. Company E trades at a higher P/E ratio.12. Option E) is correct. Times lines can be constructed where some of the payments constitute an annuity but others are unequal and thus are not part of the annuity.13. Option B) is correct. With increasing the discount rate we would less present value because of more discount rate trends to decrease the payments.14. Option D) is correct.Because the annuity cash flows must occurs at constant payments and a fixed no of periods.15. Option B) is correct. Periodic rate of interest is nothing but Nominal rate of interest. and the Effective rate of interest always greater than then Nominal rate because calculated as compounding would occurs more frequent.16. Callable bonds are called because of the interest chages in the market. It the higher the interest charges then we can call the bonds before maturity and reinvest in anthor bonds. Option B) is correct. Market

interest rates rise sharply.17. Option A) is correct. If the going rate of interest is below the coupon rate then the bonds are sell for premium. Therefore the bonds higher than the current price after one year.18. Option D) is correct. The required rate of return would increase because the bond would then be more risky to a bondholder.19. The prices of long-term bonds decline whenever interest rates rise. Option E) All 10-year, $1,000 face value, 10% coupon bond with semiannual interest payments.20 Option C) is corrected. Because Stock B is with less S.D therefore it is less risk and gives same return as Stock A. Therefore stock B could be choosen.

ANSWER:

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