Question

A) have advantages in overcoming the free-rider problem, helping to explain why indirect finance is a more important source of business finance than direct finance.
B) play a greater role in moving funds to corporations than do securities markets as a result of their ability to overcome the free-rider problem.
C) provide better-known and larger corporations a higher percentage of their external funds than they do to newer and smaller corporations, which rely to a greater extent on the new issues market for funds.
D) all of the above.
E) only A and B of the above.

Answer 1

E

Answer 2

Answer: C

Answer 3

Answer: D. that the repurchases imply no commitment to pay the same amount or more every year

Answer 4

Less than $20

Answer 5

Answer: FALSE

Answer 6

False

Answer 7

A) market value of the stock relative to earnings per share

Answer 8

Answer: D

Answer 9

Answer: You will want to order in either round or odd lots. A round lot is a group of 100 shares of common stocks. Round lot trading occurs on the NYSE. An odd lot is an order of less than 100 shares of stock. If you want your order to be filled only on the day it was given, be sure to use a day order. If you want the order to remain effective until it is filled, use an open or good-till-canceled order.
Use a market order to buy or sell securities immediately at the best price available. You use a limit order when you specify that the trade is to be only at a certain price or better. Use a stop or stop-loss order to sell if the price drops below a specified level or to buy if the price climbs above a specified level. They are used to protect your profits.

Answer 10

Answer: A

Answer 11

Answer: D

Answer 12

ρ =  =  = 0.2143

The value of the option is $86.54 = 0.2143 × $420/1.04
The NPV of the bond if purchased today is $1500 + $1470/104 + $86.54 = 0
This can be interpreted as the bond does not represent an arbitrage opportunity for the American hedge fund manager-it is appropriately priced.

Answer 13

A higher investment-grade implies a lower probability of default. This means that the convertible bond will be around for a while and longevity implies a longer horizon for achieving conversion. In our problem, it is also noted that these bonds are selling at a discount. Since the call price is probably significantly greater that the discount price, Caywood is less worried about the bonds being called when it is disadvantageous to his company.

Answer 14

Answer: C

Answer 15

D. third Friday

Answer 16

B) political risk

Answer 17

c

Answer 18

C

Answer 19

D. factor loadings.

The coefficients are called factor betas, factor sensitivities, or factor loadings.

Answer 20

Answer: D

Answer 21

The key is to calculate the cross-exchange rates of €1.25/£ and €1.30/£.

HPR

=

 =  = .1440 = 14.4%

Answer 22

Answer: D

Answer 23

a

Answer 24

Ans: B. Discount rate which results in a zero net present value for the project

Answer 25

Answer: C