MHA 706 LSUS FINAL EXAM FINANCIAL MANAGEMENT
MIDTERM COMPLETE QUESTIONS WITH CORRECT
VEERIFIED SOLUTIONS LATEST UPDATE 2024-2025
Q: Debt service requirements - CORRECT ANSWER✔✔Reflects mandatory requirements of the
debt issue, concerning issues, such as, total debt service payments, interest expense, and
repayment of principle
Q: New versus seasoned bonds - CORRECT ANSWER✔✔When market conditions change, the
value of outstanding bonds change
Q: Maturity Date - CORRECT ANSWER✔✔Date when the par value will be repaid to investors
Q: Par Value - CORRECT ANSWER✔✔Stated face value of the bond
Q: Coupon Rate - CORRECT ANSWER✔✔Stated interest rated on the bond
Q: At maturity, a bond's value must equal its par value (plus final interest payments). - CORRECT
ANSWER✔✔true
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Q: A par bond value - CORRECT ANSWER✔✔will remain at par if interest rates remain constant
Q: The value of a premium bond - CORRECT ANSWER✔✔will decrease to par value at maturity
Q: the return in each year consists of - CORRECT ANSWER✔✔the yield and capital gains yield
Q: The value of a discount bond - CORRECT ANSWER✔✔will increase to par value at maturity
Q: The yield to maturity, is theoretically the discount rate that forces the present value of the
cash flows from the bond to .... the bond's price. - CORRECT ANSWER✔✔equal
Q: Interest rates change constantly, which provides different types of interest rate risk. What are
they? - CORRECT ANSWER✔✔Price risk, Reinvestment rate risk
Q: Stockholders have a claim to all the following: - CORRECT ANSWER✔✔residual earnings (net
income) of the business, preemptive right, control of the firm
Q: For dividend-paying corporations, stockholder returns consist of both.... - CORRECT
ANSWER✔✔dividends, capital gains
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Q: Mature businesses - CORRECT ANSWER✔✔can be valued on the basis of their expected
dividend stream
Q: Start-up business - CORRECT ANSWER✔✔can by valued (roughly) by option pricing models
Q: Dividend valuation model - CORRECT ANSWER✔✔the value of a share of stock is the present
value of the expected cash flow stream to shareholders
Q: Young businesses - CORRECT ANSWER✔✔can be valued on the basis of their expected
operating cash flows
Q: If dividends are expected to grow at a constant rate forever, then the general stock valuation
model can be simplified to what model? - CORRECT ANSWER✔✔Constant Growth Model
Q: Do - CORRECT ANSWER✔✔is the last dividend paid
Q: R(Re) - CORRECT ANSWER✔✔is the stock's required rate of return
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