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Corporate Finance > midterm > Flashcards

midterm Flashcards

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1
Q

Investors will pay a premium (higher price) for a bond that offers a higher coupon rate than the market yield.

A

premium

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2
Q

based on the assumption that the company’s dividends represent the company’s cash flow to its shareholders.

A

dividend discount model

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3
Q

annual rate of return of a bond that is held to maturity

A

yield to maturity

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4
Q

aims to derive a stock’s theoretical price using the price multiples of similar companies.

A

comparable companies analysis

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5
Q

a reduction in the value of an asset with the passage of time, due to wear and tear.

A

depreciation

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6
Q

is a method of determining the intrinsic value (or theoretical value) of a stock.

A

stock valuation

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7
Q

allow the bondholders to redeem these for a pre-specified amount of equity. The bond will typically offer a lower yield due to the added benefit of converting it into stock.

A

convertible bonds

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8
Q

When an individual or entity cannot pay a creditor the pre-specified amount of interest or principal (based on a legal obligation), the person or entity may default, allowing the debtholder to claim their assets for repayment.

A

default

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9
Q

Corporate bonds are issued by corporations and offer a higher yield relative to a government bond due to the higher risk of insolvency.

A

corporate bonds

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10
Q

borrows capital from the bondholder and makes fixed payments to them at a fixed (or variable) interest rate for a specified period.

A

bond issuer

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11
Q

binding contract between an issuer and bondholder that outlines the characteristics of the bond.

A

indenture

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12
Q

Investors will pay a discount (lower price) for a bond that offers a lower coupon rate than the market yield.

A

discount

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13
Q

Bonds issued by local governments or states.

A

municipal bonds

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14
Q

fixed-income securities that are issued by corporations and governments to raise capital

A

bonds

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15
Q

may be redeemed by the company before the maturity date is reached, typically at a premium. It can be beneficial for a business operating in an environment where interest rates are decreasing because the firm can reissue bonds with a lower yield.

A

callable bonds

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16
Q

Maturity between 1-10 years

A

treasury notes

17
Q

Maturity < 1 year

A

treasury bills

18
Q

interest payments that the issuer makes to the bondholder.

A

coupon rate

19
Q

Par Coupon rate < Yield

A

false

20
Q

concerns the comparison of the investment with similar companies.

A

relative stock valuation

21
Q

A bond with a high credit rating is considered investment-grade.

A

investment grade bond

22
Q

relies on the company’s fundamental information.

A

absolute stock valuation

23
Q

describe a drastic reduction in the recoverable amount of a fixed asset.

A

impairment

24
Q

comes with a credit rating of “BB” or lower and offers a high yield due to the increased risk of company default.

A

junk bond

25
Q

date that the bond expires, when the principal must be paid to the bondholder.

A

maturity

26
Q

make no coupon payments but are issued at a discounted price.

A

zero coupon bond

27
Q

The reduced yield is attributed to the federal government’s ability to print money and collect tax revenue, which significantly lowers their chance of default. The U.S. government’s debt is considered risk-free for this reason.

A

federal government bonds

28
Q

when there is a change in legal or economic circumstances surrounding a company or a casualty loss from unforeseen devastation.

A

impairment

29
Q

Maturity > 10 years

A

treasury bonds

30
Q

the intrinsic value of a stock is calculated by discounting the company’s free cash flows to its present value.

A

discounted cash flow model

31
Q

initial amount of money invested in the bond.

A

principal

32
Q

the total amount an asset has been depreciated up until a single point.

A

accumulated depreciation

Corporate Finance (1 decks)

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