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FINC 332 Online Q3
Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
A
B
1.
The market value of any real or financial asset, including stocks, bonds, or art work, may be found by determining future cash flows and then discounting them back to the present.
a.
True
b.
False
A
B
2.
There is an inverse relationship between bond ratings and the required return on a bond. The required return is lowest for AAA-rated bonds, and required returns increase as the ratings get lower.
a.
True
b.
False
A
B
C
D
3.
Although many factors are used in assessing bond quality, a strong correlation is evident between the ratings and the financial ratios for the firms. What is the essential information that the rating agencies try to convey in the rating?
a.
expectations for the stock price
c.
likelihood of default
b.
trends in the firm’s earnings
d.
quality of firm management