This document contains 40 multiple choice questions about bonds, stocks, investment banking, and financial markets. The questions cover topics such as bond features, bond valuation, stock dividends, efficient market theory, and the primary and secondary markets. Sample questions ask about bond types like callable bonds, stock market concepts like bull and bear markets, and models used to value stocks like the dividend discount model.

1. Question 1 of 40
2.5 Points
Delagold Corporation is issuing a zero-coupon bond that will
have a maturity of 50 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?
A. $25.19
B. $250.19
C. $750
D. $1,000
Question 2 of 40
2.5 Points
When real property is used as collateral for a bond, it is termed
a/an:
A. debenture.
B. mortgaged security.

2. C. indenture.
D. senior bond.
Question 3 of 40
2.5 Points
Which of the following statements about the relationship
between yield to maturity and bond prices is false?
A. When the yield to maturity and coupon rate are the same, the
bond is called a par value bond.
B. A bond selling at a premium means that the coupon rate is
greater than the yield to maturity.
C. When interest rates go up, bond prices go up.
D. A bond selling at a discount means that the coupon rate is
less than the yield to maturity.
Question 4 of 40
2.5 Points
The __________ is the regular interest payment of the bond.

3. A. dividend
B. par
C. coupon rate
D. coupon
Question 5 of 40
2.5 Points
The __________ is the expiration date of the bond.
A. future value
B. yield to maturity
C. maturity date

4. D. coupon
Question 6 of 40
2.5 Points
Moody's has developed a corporate bond default-risk rating
system using capital and lowercase 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?
A. Baa1, A1, A3
B. Ba1, Baa2, Baa3
C. Aa2, Aa3, A1
D. Caa, Ca, C
Question 7 of 40
2.5 Points
Which of the following is NOT a category for rating
classifications of bonds?

5. A. Investment grade bonds
B. American grade bonds
C. Extremely speculative grade bonds
D. Speculative grade bonds
Question 8 of 40
2.5 Points
Which of the following types of bonds, as characterized by a
feature, by definition has two coupon payments per year?
A. Consol
B. Semiannual
C. Zero-coupon
D. Putable

6. Question 9 of 40
2.5 Points
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.
A. long-term equity
B. long-term debt
C. short-term debt
D. short-term equity
Question 10 of 40
2.5 Points
When the __________ is less than the yield to maturity, the
bond sells at a/the __________ the par value.
A. coupon rate; premium over
B. coupon rate; discount to
C. time to maturity; discount to

7. D. time to maturity; same price as
Question 11 of 40
2.5 Points
Zero-coupon U.S. Government bonds are known as:
A. STRIPS.
B. muni-bonds.
C. Uncle Sam's Empty Pockets.
D. BLANKS.
Question 12 of 40
2.5 Points

8. Which of the following is NOT an example of a bond that
contains an option feature?
A. Callable bond
B. Putable bond
C. Convertible bond
D. The above are all examples of bonds with option features.
Question 13 of 40
2.5 Points
Bonds are sometimes called __________ securities because they
pay set amounts on specific future dates.
A. variable-income
B. fixed-income

9. C. bully
D. real
Question 14 of 40
2.5 Points
The __________ is the interest rate printed on the bond.
A. coupon rate
B. semiannual coupon rate
C. yield to maturity
D. compound rate
Question 15 of 40
2.5 Points
__________ are always unsecured bonds.

10. A. Mortgage bonds
B. Debentures
C. Callable bonds
D. Junior debt bonds
Question 16 of 40
2.5 Points
Most U.S. corporate and government bonds choose to make
__________ coupon payments.
A. annual
B. semiannual
C. quarterly
D. monthly

11. Question 17 of 40
2.5 Points
Which of the following types of bonds may the issuer buy back
before maturity?
A. Callable bond
B. Putable bond
C. Convertible bond
D. Zero-coupon bond
Question 18 of 40
2.5 Points
The four steps to determining the price of a bond are:
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.
B. determine the amount and timing of the future cash flows,

12. 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.
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.
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.
Question 19 of 40
2.5 Points
Blackburn Inc. has issued 30-year, $1,000 face value, 10%
annual coupon bonds, with a yield to maturity of 9%. The
annual interest payment for the bond is:
A. $100.
B. $90.
C. $50.

13. D. $45.
Question 20 of 40
2.5 Points
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?
A. Putable bond
B. Callable bond
C. Convertible bond
D. Junior bond
Question 21 of 40
2.5 Points
__________ means that the percentage increase in the dividend
is the same each year.
A. Constant growth

14. B. Inconsistent growth
C. No growth
D. A constant cash flow
Question 22 of 40
2.5 Points
Stocks are different from bonds because:
A. stocks, unlike bonds, are major sources of funds.
B. stocks, unlike bonds, represent residual ownership.
C. stocks, unlike bonds, give owners legal claims to payments.
D. bonds, unlike stocks, represent voting ownership.
Question 23 of 40

15. 2.5 Points
A typical practice of many companies is to distribute part of the
earnings to shareholders through:
A. quarterly stock splits.
B. quarterly cash dividends.
C. semiannual cash dividends.
D. annual stock dividends.
Question 24 of 40
2.5 Points
The dividend model requires that a firm has a cash dividend
history and that the dividend history shows a:
A. constant dividend or a constant growth in price where
constant growth can be either positive or negative.
B. positive dividend or a negative growth in dividends.
C. constant dividend or a positive growth in dividends.

16. D. constant price or a positive growth in dividends.
Question 25 of 40
2.5 Points
Which of the statements below is FALSE?
A. The profits for common stock owners come before payment
to employees, suppliers, government, and creditors.
B. Shareholders elect the board of directors, which ultimately
selects the management team that runs the day-to-day operations
of the company.
C. Stock is a major financing source for public companies.
D. Common stock's ownership claim on the assets and cash flow
of a company is often referred to as a residual claim.
Question 26 of 40
2.5 Points
There are two typical ways to alter the one vote/one share
standard. One way is:

17. A. to have companies buy back nonvoting common stock.
B. to not have companies pay dividends.
C. to have companies issue classes of stock whereby one or
more classes have super voting rights.
D. to not have companies issue bonds.
Question 27 of 40
2.5 Points
If we know the dividend stream, the future price of the stock,
the future selling date of the stock, and the required return, we
can price stocks just as we priced:
A. annuities.
B. perpetuities.

18. C. bonds.
D. preferred stocks.
Question 28 of 40
2.5 Points
The hiring process for an investment banker can happen in two
ways. Which of the below is one of these ways?
A. Randomly choose an investment banking firm from a list of
underwriting firms.
B. Pick a desirable investment banking firm, usually basing the
choice on the reputation and history of the banker in its
particular industry.
C. Have the primary government regulator of your industry
choose the best investment banking firm for your company.
D. Solicit advice from a government agency and use it as your
primary guide in choosing an investment banker.
Question 29 of 40
2.5 Points

19. You buy a stock for which you expect to receive an annual
dividend of $2.10 for the 15 years that you plan on holding it.
After 15 years, you expect to sell the stock for 32.25. What is
the present value of a share for this company if you want a 10%
return?
A. $7.72
B. $15.97
C. $23.69
D. $31.41
Question 30 of 40
2.5 Points
Shortcomings of the dividend pricing models suggest that we
need a pricing model that is more inclusive than the dividend
models and provides expected returns for companies based on
aspects besides their historical dividend patterns. Which of the
below is NOT one of these aspects?
A. The company's risk
B. The premium for taking on risk

20. C. The reward for waiting
D. Stable dividends
Question 31 of 40
2.5 Points
You want to invest in a stock that pays $3.50 annual cash
dividends for the next six years. At the end of the six years, you
will sell the stock for $22.50. If you want to earn 12.5% on this
investment, what is a fair price for this stock if you buy it
today?
A. About $25.94
B. About $25.29
C. About $12.45
D. About $14.25
Question 32 of 40
2.5 Points
The __________ is the market of first sale in which companies

21. first sell
their authorized shares to the public.
A. primary market
B. secondary market
C. bull market
D. Nasdaq market
Question 33 of 40
2.5 Points
Strong-form efficient markets theory proclaims that:
A. one can chart historical stock prices to predict future stock
prices such that you can identify mispriced stocks and routinely
outperform the market.
B. one can exploit publicly available news or financial
statement information to routinely outperform the market.

22. C. current prices reflect the price and volume history of the
stock, all publicly available information, and all private
information.
D. current prices reflect the price and volume history of the
stock, all publicly available information, but no private
information.
Question 34 of 40
2.5 Points
What if the company goes out of business in 15 years and thus
pays an annual dividend of $2.10 for only those 15 years? What
is the present value of a share for this company if we want a
10% return on the stock?
A. $15.97
B. $16.97
C. $17.97
D. $18.97
Question 35 of 40
2.5 Points

23. Which of the statements below is FALSE?
A. In estimating the current price using the constant growth
dividend
model, we let g be the growth rate on the dividend stream and r
be the
rate of return required by the potential buyer of the stock.
B. Constant growth means that the percentage increase in the
dividend is
the same each year.
C.
Div0 refers to the dividends that were just been paid to the
current owner of the stock.
D. One unlikely dividend pattern is to raise or grow dividends
by a fixed
amount at fixed intervals.
Question 36 of 40
2.5 Points
Which of the following statements is true?
A. The dealers of stock are not allowed to make money on the
difference between what they buy the stock for and what they
sell it for.

24. B. A bear market is a prolonged rising market, one in which
stock prices in general are increasing.
C. The ask price is the price at which a dealer is willing to sell,
and the bid price is the price at which a dealer is willing to buy.
D. A bull market is a prolonged declining market, one in which
stock prices in general are decreasing.
Question 37 of 40
2.5 Points
__________ refers to how quickly information is reflected in
the available prices for trading.
A. Market efficiency
B. Mechanical efficiency
C. Informational efficiency
D. Operational efficiency
Question 38 of 40

25. 2.5 Points
Which of the statements below is true?
A. Buying of shares is the selling of ownership in the company.
B. A company is said to go "private" when it opens up its
ownership structure to the general public through the sale of
common stock.
C. Private companies choose to sell stock to attract permanent
financing through equity ownership of the company.
D. Most companies have the resident expertise to complete an
initial public offering (IPO), or first public equity issue.
Question 39 of 40
2.5 Points
You can think of the __________ as the "used stock" market
because these shares have been owned or "used" previously.
A. secondary market
B. primary market

26. C. NYSE market
D. initial public offering market
Question 40 of 40
2.5 Points
In the United States, there are three well-known secondary
stock markets. Which of the below is NOT one of these?
A. The New York Stock Exchange (NYSE)
B. The Chicago Stock Exchange (CSE)
C. The National Association of Securities Dealers and their
trading system NASDAQ (National Association of Securities
Dealers Automated Quotation System)
D. The American Stock Exchange (AMEX)