Why you would prefer equity financing to debt financing

Assignment Help Microeconomics

Reference no: EM131462616

Assignment

1. A bond with high default risk pays __ a bond with low default risk.

A. a lower interest than. B. a higher interest than C. the same rate as

2. A long term bond pays ___ a short term bond.

A. a lower interest than. B. a higher interest than
C. the same rate as D. a higher or lower interest than

3. A two-year bond rate increases if one-year bond rate __.

A.increases B. decreases. C. is expected to decrease. D. remains the same

4. The current 1-year rate is 6%, and the yield curve slopes down. The 1-year rate expected 1 year from now would be __ % (choose the best one, given the information available).

A.9 B. 8 C. 7 D. 6 E. 5

5. A downward-sloping yield curve suggests that financial market participants expect short-term interest rates will ____ in the future.

A. rise. B. fall. C. equal zero. D. not change.

6. Assume that the current one-year rate is 6% and the two-year rate is 10%. Given this information, the one-year rate expected one year from now is __%.

A. 4 B. 6 C. 8 D. 14 E. 16

7. The fundamental value of a share of stock equals the present value of

A. expected dividends. B. expected real interest rate.
C. coupon payments. D. expected nominal interest rate.

8. Which of the following does NOT represent a form of debt finance?

A. loans B. bonds C. stock

9. If the current one-year interest rate increases by 4% while the expected future one-year interest rate does not change, i2t will

A. decrease by 4%. B. increase by 2%.
C. decrease by 2%. D. increase by 4%.

10. Suppose the Fed (central bank), as expected, decreases the money supply. As a result of this expected reduction in the money supply, stock prices will

A. increase. B. decrease.
C. not change. D. have an ambiguous effect.

11. The government announces on 2/1/2017 that it will increase taxes on 5/1/2017 (that is, the tax-increase policy will be implemented on 5/1/2017), and this announcement is known to everyone in the economy. The tax-increase policy will __ stock prices on 5/1/2017. Assume that the Fed takes no action in response to the announcement.

A. increase. B. decrease.
C. not change. D. have an ambiguous effect.

12. The government announces on 2/1/2017 that it will increase taxes on 5/1/2017 (that is, the tax-increase policy will be implemented on 5/1/2017), and this announcement is known to everyone in the economy. This announcement would __ stock prices on 2/1/2017. Assume that the Fed takes no action in response to the announcement.

A. increase. B. decrease.
C. not change. D. have an ambiguous effect.

13. Suppose the current one-year interest rate is 4%. Also assume that financial markets expect the one-year interest rate in 2018 to be 5%, and expect the one-year interest in 2019 to be 6%. Given this information, the three-year interest rate will be

A. 2% B. 3% C. 4% D. 5%

14. When choosing between one-year bonds and two-year bonds, assume that investors care about the expected returns and about uncertainty. In particular, they prefer a higher expected return and prefer to have less uncertainty about the return. The current one-year rate is 6% and the one-year rate expected one year from now is 10%. Given this information, the two-year rate is __%.(choose the best one, given the information available).

A. 7 B. 8 C. 10 D. 14 E. 16
15. Lower income individuals are ___ likely to purchase high grade municipal bonds than high grade corporate bonds.

A.more B. less C. equally

16. As a business person, explain why you would prefer equity financing to debt financing.

Reference no: EM131462616

Questions Cloud

Discuss the purpose of the legislative action : Discuss the purpose of the legislative action. Describe the problem/problems that the legislative action is trying to solve or prevent

How would you classify costco as an in-store retailer : More than 20 years after Costco opened its first warehouse club store in Seattle, Washington, the company's philosophy can still be summed up as "pile 'em high.

Concept of derived demand-regarding heavy vs. light users : Which of the following statements regarding the concept of derived demand is true? Which of the following statements regarding heavy vs. light users is true.

What could you recommend howard to do now : Find another key person in NCC and start afresh with relationship building. You must win the account of NCC.What could you recommend Howard to do now?

Why you would prefer equity financing to debt financing : As a business person, explain why you would prefer equity financing to debt financing.

Define and justify the attributes of final product : Define and justify the attributes of final product as they are based on its known nature and the intended manufacturing scheme for final product.

At what brick-and-mortar store did you have worst experience : Discovery statement: In this chapter you learned that retailers are marketing intermediaries and part of the distribution channel.

Discuss how pollution can result in acid rain : Discuss how pollution can result in acid rain, depletion of the ozone layer, and cause the greenhouse effect

How long will it take to pay off the mortgage : Your friend tells you he has a very simple trick for taking one-third off the time it takes to repay your mortgage: how long will it take to pay off mortage

User Account

All Pages