STOCKS AND BONDS + LOANS AND AMORTIZATION

Question 1

form of equity financing by allowing investors to be part of company

Answer 1

stocks

Question 2

debt financing / raising money by borrowing from investors

Answer 2

bonds

Question 3

high risk, high reward

Answer 3

stocks

Question 4

low risk, low reward

Answer 4

bonds

Question 5

ratio of annual dividend per share and market value per share

Answer 5

stock yield ratio / current stock yield

Question 6

original amount of money borrowed by the company

Answer 6

par / face value

Question 7

dividend = _____ x _____ x _____

Answer 7

dividend percentage, par value, # of shares

Question 8

dividend per share / market value

Answer 8

stock yield ratio / current stock yield

Question 9

periodic interest payment that the bondholder receives during time between purchase date and maturity date

Answer 9

coupon

Question 10

coupons are usually received __________

Answer 10

semi-annually

Question 11

P = F

Answer 11

par

Question 12

P < F

Answer 12

discount

Question 13

P > F

Answer 13

premium

Question 14

present value of all cash inflows to the bondholder

Answer 14

fair price of a bond

Question 15

amount of semi-annual coupons = [(_____) x (_____)] / _

Answer 15

par / face value, coupon rate, 2

Question 16

distribution of company’s profits to shareholders

Answer 16

dividends

Question 17

investor has preferential rights over common shareholders to dividends and company assets

Answer 17

preferred stock

Question 18

investor has voting rights and shares directly in the success / failure of business

Answer 18

common stock

Question 19

method of paying a loan through installment

Answer 19

amortization

Question 20

Loan Types (3)

Answer 20

1. Business
2. Consumer
3. Collateral

Question 21

• loan secured by collateral
• borrower is obliged to pay at specific terms

Answer 21

collateral

Question 22

mortgage on movable property

Answer 22

chattel mortgage

Question 23

any remaining debt

Answer 23

outstanding balance