Chp5-Quiz Flashcards Preview

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Flashcards in Chp5-Quiz Deck (10):
1

If market interest rates fall, the market will place a discount on bonds which have coupon rates that are higher than the market interest rate.

FALSE

2

As the price of a bond decreases, the coupon rate

Remains the same

3

Higher dividends do not necessarily result in higher costs of equity.

TRUE

4

The cost of equity can be calculated by more than one method.

TRUE

5

The efficient market theory holds that, at any given moment the prices of securities reflect all that is or can be known about a company's future.

TRUE

6

For WACC purposes, to calculate the cost of debt, you multiply the interest rate by (1 - Tax Rate).

TRUE

7

The Capital Asset Pricing Model relates the historical returns of that company to

The market as a whole

8

As the price of a bond increases, the coupon rate

Remains the same

9

The call price of a bond is also referred to as

The strike price

10

A firm may generate equity through

Earnings & issuance of stock