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1. Finance theory suggests that the market value of a bond is based… 1. Finance theory suggests that the market value of a bond is based upon_______.a. the future value of interest paid on a bondb. the sum total of principal and interest paid on a bondc. the sum of the present value of the bond’s interest payments and the present value of the par valued. the future value of a bond’s par value plus the future value of the interest payments2. Shafer Corporation issued callable bonds. The bonds are most likely to be called if_____.a. Interest rates decreaseb. interest rates increasec. Shafer Corporation needs additional financingd. Shafer Corporation’s stock price increases dramatically3. Which of the following statements concerning bonds and risk is most accurate?a. A rational investor will always prefer AAA-rated bonds to junk bonds.b. AAA-rated bonds yield high returns because of very little risk.c. AAA-rated bonds may also be called high-yielding securities.d. Junk bonds yield high returns because these bonds are very risky.4. A bond is selling at a discount if it has ___________ and ___________.a. market value $985; par value $1,000b. market value $1,000; Par value $1,000c. coupon rate 7.5%; required rate of return 6%d. market value $1,025; par value $1,0005. What is the coupon payment for a $1,000 par value, semiannual bond, with a required rateof return of 6% and, a coupon rate of 9%?a. $30b. $45c. $60d. $906. What provision entitles the common shareholder to maintain a proportionate share ofownership in a firm?a. the cumulative featureb. the convertible featurec. the proportionality rightd. the preemptive right7. Who has the last claim on assets and income if a firm should fail?a. Managersb. Preferred stockholdersc. Bond holders.d. Common stockholders  8. RDK’s preferred stock is currently selling for $21 per share. If preferred shareholders earn$3.50 per share in dividends, what is the required rate of return for preferred shareholders?a. 16.67%b. 12.00%c. 7.30%d. 6.00%9. Zee Enterprise has an internal growth rate of 9%. The company last paid dividends of $3.00per share to common shareholders. How much dividends per share will commonshareholders earn in the next period?a. $2.75b. $3.27c. $3.33d. $3.9010. Alcove last paid dividends of $4.20 per share to ordinary shareholders. The company’sinternal growth rate is 8%, and the required rate of return for ordinary shareholders is 13%.What is the value of Alcove’s ordinary shares?a. $90.72 per shareb. $84.00 per sharec. $52.50 per shared. $20.00 per share Business Finance FIN 320

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