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FIN 301 Exam 2 Questions and Answers $10.49
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Exam (elaborations)

FIN 301 Exam 2 Questions and Answers
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  • FIN 301
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Maturity of the Bond - Answer-The number of years until the issuer returns the face value to the buyer Face value - Answer-The principal of the bond, which has to be repaid at maturity NPV Rule - Answer-The NPV rule says that you should accept a project if its NPV greater than 0 because it ad...

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  • August 24, 2024
  • 3
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

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  • fin 301 exam 2 questions and answers
  • maturity of the bond answer the number of years

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  • FIN 301
  • FIN 301

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FIN 301 Exam 2 Questions and Answers
Maturity of the Bond - Answer-The number of years until the issuer returns the face
value to the buyer

Face value - Answer-The principal of the bond, which has to be repaid at maturity

NPV Rule - Answer-The NPV rule says that you should accept a project if its NPV
greater than 0 because it adds value to the firm equal to the NPV.

NPV is Measuring - Answer-Value creation

Return on Investment - Answer-IRR is Measuring

Par - Answer-sales price equals maturity values

Discount - Answer-Sales prices less than maturity values

Premium - Answer-Sales price greater than maturity values

When interest rates go up, bond prices go down, When bond priced go up, interest
rates go down - Answer-How bond prices vary with interest rates

short-term bonds - Answer-long-term bonds are more interest sensitive than

Stock prices goes up when discount goes down - Answer-How stock prices typically
vary with changes in the discount rate

Dividends will grow at a constant rate forever - Answer-Defining assumption of the
constant dividend growth model

Lower dividends lower stock price
Higher dividends higher stock price - Answer-How stock prices typically vary with
expected dividends

First obligation is to pay creditors then pay all owners/holders of preferred stock then (if
there's a residual) return to owners. - Answer-Preferred stock has priority over common
stock, but not debt. Know what that means.

capital budgeting - Answer-the process of planning and evaluating long-term investment
expenditures

IRR (internal rate of return) - Answer-The discount rate that would make NPV equal to
zero, may be more than one IRR, may rank competing investment projects incorrectly.

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