GALLANO GROUP

Question 1

Stated value from the firm’s Balance Sheet

Answer 1

Book Value

Question 2

The price for the asset at any given time – determined by supply and demand in the marketplace. Asset can be bought or sold at this price.

Answer 2

Market Value

Question 3

Present value of the asset’s expected cash flow.

Answer 3

INTRINSIC VALUE

Question 4

Also called the face value.

Answer 4

Par Value

Question 5

Borrowers (firms) typically make periodic payments to the bondholders.

Answer 5

Coupon Interest Rate

Question 6

______ is the percent of face value paid every year.

Answer 6

Coupon rate

Question 7

Time at which the maturity value (Par Value) is paid to the
bondholder.

Answer 7

Maturity

Question 8

Document which details the legal obligation of the corporation to the bondholders. It lists all the terms and conditions of the bond.

Answer 8

indenture

Question 9

is the present value of all the cash flows the investor receives as a result of holding the bond.

Answer 9

Value of the bond

Question 10

is an application of Present Value.

Answer 10

Bond Valuation

Question 11

refers to the potential loss in value of an investment or asset due to fluctuations in interest rates.

Answer 11

Interest Rate Risk