The yield curve in an economic period where lower future inflation is expected would most likely be

The yield curve in an economic period where lower future inflation is expected would most likely be

upward-sloping
flat
downward-sloping
linear

Nico Nelson, a management trainee at a large New York based bank is trying to estimate the real rate of return expected by investors. He notes that the 3-month T-bill currently yields 3 percent and has decided to use the consumer price index as a proxy for expected inflation. What is the estimated real rate of interest if the CPI is currently 2 percent?

5%
1%
3^
2%

All of the following are examples of standard debt provisions EXCEPT

maintain all facilities in good working order
paying taxes and liabilities when due
maintaining satisfactory accounting records
limiting the annual dividend payment

From the corporation’s point of view, the advantages of issuing preferred stock include all of the following EXCEPT

its increased financial leverage
its flexible dividend policy
its excellent merger security
its difficulty to retire

The ______ measures the dispersion around the expected value.

coefficient of variation
chi square
mean
standard deviation

Perfectly ______ correlated series move exactly together and have a correlation coefficient of ______, while perfectly ______ correlated series move exactly in opposite directions and have a correlation coefficient of ______.

negatively; -1; positively; +1
negatively; +1; positively; -1
positively; -1; negatively; +1
positively; +1; negatively; -1

The purpose of adding an asset with a negative or low positive beta is to

Reduce profit.
Reduce risk.
Increase profit.
Increase risk.

A ______ is a complex and lengthy legal document stating the conditions under which a bond has been issued.

bond debenture
warrant
sinking fund
bond indenture

The process that links risk and return in order to determine the worth of an asset is termed

Evaluation.
Valuation.
Discounting.
Variable growth.

Hewitt Packing Company has an issue of $1,000 par value bonds with a 14 percent annual coupon interest rate. The issue has ten years remaining to the maturity date. Bonds of similar risk are currently selling to yield a 12 percent rate of return. The current value of each Hewitt bond is ______.

$791.00
$1,000
$1,052.24
$1,113.00

All of the following are characteristics of preferred stock EXCEPT

It is often considered quasi-debt due to fixed payment obligation.
It has less restrictive covenants than debt.
It gives the holder voting rights which permit selection of the firm’s directors.
Its holders have priority over common stockholders in the liquidation of assets.

If a firm has class A and class B common stock outstanding it means that

Each class receives a different dividend.
The par value of each class is different.
The dividend paid to one of the classes is tax deductible by the corporation.
One of the classes is non-voting stock.

The attempt by a nonmanagement group to gain control of the management of a firm by soliciting a sufficient number of proxy votes is called

Hostile takeover.
Super voting shares.
Proxy battle.
None of the above.

Emmy Lou, Inc. has an expected dividend next year of $5.60 per share, a growth rate of dividends of 10 percent, and a required return of 20 percent. The value of a share of Emmy Lou, Inc.’s common stock is

$28.00
$56.00
$22.40
$18.67

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