A marketable security is an unsecured bank loan whereby the bank agrees to lend a company up to a specific amount of cash, at the discretion of the company. Indicate whether the statement is true or false. ANSWER Answer: FALSE Explanation: A LINE OF CREDIT is an unsecured bank loan whereby the bank […]
Date: September 19th, 2020
One method a company may use to handle a cash shortfall is to draw cash from savings. Indicate whether the statement is true or false. ANSWER Answer: TRUE
Date: September 19th, 2020
The steeper the slope of the EBIT-EPS capital structure line, the lower is the financial risk. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
The ________ is the time period that elapses from the point when a firm sells a finished good on account to the point when the receivable is collected. A) cash conversion cycle B) average payment period C) average age of inventory D) average collection period ANSWER D
Date: September 19th, 2020
Using the bond yield spread matrix above, calculate the fair yield on a 5-year noncallable corporate bond that is rated “B” by S&P, given also that the yield on 5-year Treasuries is 4.44%. a. 4.15% b. 6.15% c. 8.59% d. 10.59% ANSWER C
Date: September 19th, 2020
In January, 2002, Jones Company issues a pure-discount bond with a promised payment of X=$1000 that matures in T=5 years. The market price of the bond is P=$777 . The bond is default- risky. Specifically, the probability is 0. 8 that Jones Company will pay the full amount of X at maturity, and is 0.2 […]
Date: September 19th, 2020
Financial breakeven point represents the level of earnings after interest and taxes necessary for a firm to cover its fixed operating and financial changes—that is, the point at which dividends per share is equal to zero. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
The ________ is the length of time from the point when raw materials are purchased on account to the point when payment is made to the supplier of the goods. A) cash conversion cycle B) average payment period C) average age of inventory D) average collection period ANSWER B
Date: September 19th, 2020
Compute the promised yield to maturity and expected return to maturity on a default-risky 3-year pure-discount corporate bond that has a current price of $543 . With a probability of 0.6, the issuer will repay the principal of $1,000 at maturity. However, the probability is 0.4 that the issuer will default, in which case bondholders […]
Date: September 19th, 2020
Which of the following is NOT a possible advantage to holding marketable securities? A) Price appreciation B) Dividends C) Interest earnings D) All of the above are potential advantages to owning marketable securities. ANSWER Answer: D
Date: September 19th, 2020
