A bond was issued at face value but is now trading at a price of $873. What best describes this situation? The bond is trading at a premium. The bond is trading at a discount. The bond is trading at par value. The bond is trading at face value.

The bond is trading at a discount.

When calculating the Yield to Maturity (YTM) of a bond, what does the result best describe? The bond's coupon rate. The bond's face value. The current market price of the bond. An estimation of the return on investment if held until maturity.

An estimation of the return on investment if held until maturity.

Which of the following bonds will generally have the lowest default risk? Corporate bonds Municipal bonds Junk bonds Bonds issued by the US Treasury

Bonds issued by the US Treasury

Assume a company issued a callable bond with an 8% coupon rate a few years ago. Which of the following changes are likely to prompt the firm to call the bond? The market interest rate decreases to 5%. The company's credit rating is downgraded. The company's stock price increases. The market interest rate increases to 10%.

The market interest rate decreases to 5%.

Bonds and Corporate Finance: Valuation, Risk Assessment and Capital Structure

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Finance - Personal Finance

charlotte1oxhi Created by 10 mon ago

Cards in this deck(11)

A bond was issued at face value but is now trading at a price of $873. What best describes this situation?

When calculating the Yield to Maturity (YTM) of a bond, what does the result best describe?

Which of the following bonds will generally have the lowest default risk?

Which of the following terms is related to the definition: 'The interest rate that equates the present value of the bond's cash flows with the bond's price'?

Assume a company issued a callable bond with an 8% coupon rate a few years ago. Which of the following changes are likely to prompt the firm to call the bond?

Assume a company plans to make two new bond issues at the same time. Both will have the same coupon rate and maturity. The firm plans to sell the regular bond at face value, that is, at $1000 per bond. The second bond will be callable. What must be true about the sale price of this second bond?

Why do companies issue stock?

One person owns a company's bond, and another owns a share of stock. The company makes a profit of $50 during a certain year. The bond holder is owed a coupon payment of $50, and the stock holder is promised a dividend of $50. Which of the following is the likeliest outcome of this situation?

Assume you bought a share of stock a year ago at a certain price, and today you need the money, so are forced to sell it even though the price has decreased. What does this situation indicate about the stock's capital gains yield?

Whited Inc.'s stock currently sells for $35.25 per share. The dividend is projected to increase at a constant rate of 4.75% per year. The required rate of return on the stock, rs, is 11.50%. What is the stock's expected price 5 years from now?

Kale Inc. forecasts the free cash flows (in millions) shown below. If the weighted average cost of capital is 11% and FCF is expected to grow at a rate of 5% after 2 years, what is the firm's total corporate value, in millions?

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