1. Cost of capital:
    1. Is referred to the capitalization rate in the real estate valuation process.
    2. Represents the required rate of return for a project.
    3. May be derived using the capital asset pricing model.
    4. All of the foregoing.
  2. The capitalized earnings valuation method may be used to appraise the worth of:
    1. Common stock.
    2. Step-up notes.
    3. Preferred stock and real estate.
    4. Mortgage backed securities.
  3. If a bond's yield declines from 6.3% to 4.9% and its price increases 6.5%, then its duration is:
    1. 4.64
    2. 5
    3. .02
    4. Either a or b
  4. Inputs to the constant growth dividend model include all of the following, except:
    1. The risk-free rate.
    2. The current yield on corporate bonds of similar maturity.
    3. The company's dividend stream.
    4. The beta of the stock being evaluated.
    5. The projected earnings growth rate.
  5. With respect to duration, which of the following definitions correct?
    1. The degree of a bond's volatility in response to interest rate fluctuations.
    2. How quickly the creditor expects to be repaid.
    3. Of two bonds with identical maturities, the more highly rated paper has the lower duration.
    4. Comparing two bonds of equal maturity, the zero coupon bond has the longer duration.
    1. I, II, III
    2. III, IV
    3. I, II, IV
    4. I, II, III, IV
Answers 1 - 20

Related Articles
  1. Financial Advisor

    Why Bondholders Should Manage Duration Risk

    Bonds and bond funds are fixed-income investments, but their duration, combined with changes to interest rates, can lead to price fluctuations.
  2. Investing

    Why You Should Avoid Fixating on Bond Duration

    Financial advisors and their clients should then focus on a bond fund’s portfolio rather than relying on any single metric like duration.
  3. Financial Advisor

    The Effect of Fed Fund Rate Hikes on Your Bond Portfolio

    Learn how an increase in the federal funds rate may impact a bond portfolio. Read about how investors can use the duration of their portfolio to reduce risk.
  4. Investing

    Use Duration And Convexity To Measure Bond Risk

    Find out how this measure can help fixed-income investors manage their portfolios.
  5. Investing

    What Does Duration Mean?

    Duration measures a fixed-income’s sensitivity to changes in interest rates.
  6. Investing

    How Rising Interest Rates and Inflation Affect Bonds

    Understand bonds better with these four basic factors.
  7. Investing

    Why Investors Should Use Duration to Compare Bonds

    Duration is a helpful metric that determines a bond's sensitivity to interest rates.
  8. Investing

    The Basics Of Bond Duration

    Duration tells investors the length of time it will take a bond's cash flows to repay the investor the price he or she paid for the bond. A bond's duration is stated as a number of years and ...
Frequently Asked Questions
  1. What Was the First Company to Issue Stock?

    The Dutch East India Co. was the first company to sell shares of the business to the public in 1602.
  2. Who Benefits From Loaning Shares in a Short Sale?

    Does loaning shares in a short sale transaction derive any benefit other than interest on the loan?
  3. What is the difference between a lien and an encumbrance?

    Understand the legal terms ''lien'' and ''encumbrance,'' and learn the significant distinction between these two essential ...
  4. How Oil Cos. Treat Reserves on a Balance Sheet

    Oil reserves are estimated quantities of crude oil that have a high degree of certainty.
Trading Center