FIN 364 DeVry Week 6 Homework

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FIN 364 DeVry Week 6 Homework

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FIN 364 DeVry Week 6 Homework

FIN364

FIN 364 DeVry Week 6 Homework

FIN 364 DeVry Week 6 Homework

  1. Question : (TCO 7)The secondary markets for capital market securities have facilitated economic growth in the U.S. because
  • they help provide marketability for capital market claims.
  • they have increased people’s willingness to buy capital market claims.
  • they make people more willing to invest because they can more easily diversify their risk.
  • All of the above

Question 2. Question : (TCO 7) A capital market financing is most likely to finance

  • new plant and equipment.
  • seasonal inventory needs.
  • a quarterly dividend payment.
  • the sale of common stock.

Question 3. Question : (TCO 7) You purchase a Treasury inflation-protected note with an original principal amount of $1,000,000 and a 2.8 percent annual coupon (paid semiannually). What will the first coupon payment be if the semiannual inflation over the first six months is 1.2%?

  • $14,168
  • $14,000
  • $28,336
  • $28,000

Question 4. Question : (TCO 7) Which of the following statements about STRIPs is true?

  • STRIPs are sold directly by the Treasury Department.
  • When a STRIP is created, all interest payments become one security and the principal payment becomes the other.
  • Many small investors prefer STRIPs because they require a lower minimum investment than original Treasury notes and bonds.
  • Treasury securities dealers create STRIPs because they expect to sell the created zero-coupon securities for more than what they paid for the original Treasury security.

Question 5. Question : (TCO 7) Most general obligation bonds are backed by

  • corporations.
  • brokers.
  • the issuing government.
  • None of the above

Question 6. Question : (TCO 7) Corporate bonds are less marketable than money market instruments and corporate equities because

  • they have special features (e.g., call provisions) that make them difficult to value.
  • they are long-term securities, which tend to be riskier and less marketable.
  • they have special features (e.g., call provisions) that make them difficult to value and they are long-term securities, which tend to be riskier and less marketable.
  • corporate bonds are in fact not less marketable than money market instruments and corporate equities.

Question 7. Question : (TCO 7) The demand for junk bonds came primarily from

  • life insurance companies.
  • savings and loans association.
  • pension funds.
  • All of the above

Question 8. Question : (TCO 7) The current exchange rate between U.S. Dollar and Euro is $1.355/.738. It means that

  • one Euro can buy 0.738 Dollars.
  • one Dollar can buy 0.738 Euros.
  • one Euro can buy 1.355 Dollars.
  • both one Dollar can buy 0.738 Euros and one Euro can buy 1.355 Dollars.

Question 9. Question : (TCO 7) A payment guarantee issued by a commercial bank on behalf of an importer is a

  • sight draft.
  • time draft.
  • letter of credit.
  • documented transfer.

Question 10. Question : (TCO 7) Which of the following is not the reason the Eurocurrency market is an attractive place to store excess liquidity for corporations, countries, and individuals?

  • Investors are allowed to hold debt securities in bearer form
  • Automatic withholding of tax on interest earned
  • Investments earn higher returns
  • High liquidity of Eurocurrency deposits