Reference no: EM131826448

1) ?The current market interest rate declines from 10 percent to 8 percent. Due to interest rate reinvestment risk, the bondholders will:

a. ?receive a lower market value for the bond.

b. receive a higher principal at the maturity of the bond.?

c. ?call back the bond before its maturity.

d. ?earn a lower return on the reinvested cash flows.

e. ?receive a lower coupon interest than mentioned in the bond indenture.

2) How can a preferred stock incorporate a maturity provision with the preferred stock issue?

a. By including a call provision

b. By including a cumulative dividends provision

c. By including a preemptive right

d. By including a participating provision

e. By including a voting provision

3) ?A firm's rating by a rating agency is based on:

a. ?the firm's ratio of debt to total assets.

b. the dividends paid in the last year by the firm.?

c. the earnings per share of the shareholders of subsidiary firms.?

d. exchange rate fluctuations of the U.S Dollar and Euro.?

e. ?no precise formula.

4) Commercial paper is a type of:?

a. ?promissory note.

b. ?credit note.

c. ?debit note.

d. ?bond indenture.

e. ?T-bill.