1. Which of the following assets is most likely to trade over the counter but still have high liquidity? a. A short-term Treasury bond b. A long-term corporate bond c. A short-term corporate bond d. A large-cap stock e. A small-cap stock 2. Assume you purchased 600 shares of XYZ common stock on margin at $35 per share from your broker. If the initial margin is 60%, the amount you borrowed from the broker is closest to _. a. $8,500 b. $21,000 c. $29,500 d. $12,500 e. $16,000 3. You invest $1,550 in security A with a beta of 1.4 and $1,350 in security B with a beta of 0.4. The beta of this portfolio is closest to _____ . a. 0.95 b. 0.90 c. 1.35 d. 1.05 e. 1.15 4. Which of the following orders is most likely to increase the difference between the highest bid price and the lowest ask price? a. A large market order b. A large limit order c. A small limit order d. A small market order e. There will be no major difference between these 5. Bond X is worth $91 today. The bond will mature in one year and pay $100 or $84 with probabilities 0.75 and 0.25, respectively. Assuming the bond pays no cash flows during the year, which of the following is closest to the expected return on the bond? a. 5.5% b. 5.0% c. 6.0% d. 6.5% e. 7.0%

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter16: Capital Structure Decisions

Section: Chapter Questions

Problem 10MC: Suppose there is a large probability that L will default on its debt. For the purpose of this...

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1. Which of the following assets is most likely to trade over the counter but still have high liquidity?

a. A short-term Treasury bond
b. A long-term corporate bond
c. A short-term corporate bond
d. A large-cap stock
e. A small-cap stock

2. Assume you purchased 600 shares of XYZ common stock on margin at $35 per share from your broker. If the initial margin is 60%, the amount you borrowed from the broker is closest to _________.

a. $8,500
b. $21,000
c. $29,500
d. $12,500
e. $16,000

3. You invest $1,550 in security A with a beta of 1.4 and $1,350 in security B with a beta of 0.4. The beta of this portfolio is closest to _____________ .

a. 0.95
b. 0.90
c. 1.35
d. 1.05
e. 1.15

Which of the following orders is most likely to increase the difference between the highest bid price and the lowest ask price?

a. A large market order
b. A large limit order
c. A small limit order
d. A small market order
e. There will be no major difference between these

Bond X is worth $91 today. The bond will mature in one year and pay $100 or $84 with probabilities 0.75 and 0.25, respectively. Assuming the bond pays no cash flows during the year, which of the following is closest to the expected return on the bond?

a. 5.5%
b. 5.0%
c. 6.0%
d. 6.5%
e. 7.0%

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