Exam 2

Question 1

What are Moody’s investment grade bonds rated

Answer 1

Aaa
Aa
A
Baa

Question 2

What are S and P’s investment grade bonds

Answer 2

AAA
AA
A
BBB

Question 3

When did the bond market collapse?

Answer 3

Early 1990s

Question 4

Floating Rate Bonds?

Answer 4

Bonds interest rate is tied to something else

EX: Like the Treasury Bond rate

Question 5

The Federal Reserve Discount rate is affected by these 3 things

Answer 5

MRP
DRP
LP

Question 6

Convertible Bonds

Answer 6

Bond that can be converted into stock by the bondholder at an option

Question 7

Bonds with Warrants

Answer 7

Bond that allows you as the bondholder to buy stock for a stated price

Question 8

Indexed (Purchasing Power) Bonds

Answer 8

Bonds where the interest rate that calculates the pmt’s rises as inflation also rises

Question 9

YTM = ___ + ___

Answer 9

DY + CGY

Question 10

When a company is liquidized, who gets paid first? Who gets paid last?

Answer 10

1st - Secured Creditors

2nd - Common Stockholders

Question 11

What do non-diversified investors care about?

What do diversified investors care about?

Answer 11

Non-Diversified

• Co-efficient of variation
• CV

Diversified
-Beta

Question 12

3 ways a firm can avoid a takeover

Answer 12

• Require 75% vote instead of 50% from stockholders to approve merger
• Elect 1/3 new board of directors
• Vote in poison pill provison

Question 13

What is a poison pill?

Answer 13

Allows firm that is getting taken over to buy the takeover firm’s shares at a reduced price

Question 14

Ks

Answer 14

Required Return

Question 15

Kd

Answer 15

Required Return of Market

Question 16

FAANG

Answer 16

Facebook
Apple 
Amazon 
Netflix
Google