C4-Financial Investment follow slides

What is the definition of financial investments for a company?

• Using capital to buy luxury items

• Using capital to start a new business venture

• Using capital to buy real estate properties

• Using capital to buy securities to maximize profitability and minimize risks

What is the formula for calculating the present value of a perpetual bond?

• Present value = Annual coupon payment * (1 + discount rate)

• Present value = Annual coupon payment * discount rate

• Present value = Annual coupon payment / (1 + discount rate)

• Present value = Annual coupon payment / Discount rate

What is the characteristic of common stocks in terms of ownership?

• Common stockholders have priority over preferred stockholders

• Common stockholders have a residual claim to the income and assets of a company

• Common stockholders receive fixed interest payments

• Common stockholders have no voting rights

What is the classification of preferred stocks that allows conversion to common shares?

• Cumulative preferred stock

• Exchangeable preferred stock

• Convertible preferred stock

• Perpetual preferred stock

What is the formula for calculating the yield to maturity of a bond?

• YTM = Annual coupon payment / Bond price

• YTM = Annual coupon payment * Bond price

• YTM = Annual coupon payment / (1 + discount rate)

• YTM = Annual coupon payment / (1 + YTM)

What is the characteristic of preferred stocks in terms of dividend payment?

• Preferred stockholders receive dividends before common stockholders

• Preferred stockholders receive dividends after bondholders

• Preferred stockholders have no rights to receive dividends

• Preferred stockholders have priority over common stockholders in dividend payment

What is the valuation model used for common stocks with zero growth?

• Constant Growth Model

• Zero-Growth Model

• Discount Cashflow Model

• Dividend Discount Model

What is the classification of bonds that have no fixed maturity date?

• Serial bond

• Zero-coupon bond

• Term bond

• Convertible bond

What is the formula for calculating the present value of a regular bond with semi-annual coupon payment?

• Present value = Annual coupon payment * 2

• Present value = Annual coupon payment / (1 + discount rate)

• Present value = Annual coupon payment * discount rate

• Present value = Annual coupon payment / 2

What is the characteristic of preferred stocks in terms of voting rights?

• Preferred stockholders have limited voting rights

• Preferred stockholders have no voting rights

• Preferred stockholders have voting rights only in odd years

• Preferred stockholders have full voting rights