Question

What risk cannot be eliminated through diversification? A. business risk B. market risk C. financing risk...

What risk cannot be eliminated through diversification?

A. business risk

B. market risk

C. financing risk

D. industry risk

Common stock can be described as _________.

A. ownership of the company with nothing else promised.

B. being closer as a bond than an investment C.D.

C. having a guaranteed fixed dividend.

D. not being a go investment.

A bond’s coupon rate explains to you what about the bond?

A. when the bond matures.

B. current yield.

C. payment amount of par value.

D. payment amount of current value.

A callable bond can be called by_________.

A issuing company

B. holder of bond

C. government officials

D. phone companies only

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Homework Answers

Answer #1

1B

Market risk is systematic risk which is inherent to the market. Hence it will remain no matter which type of stock is selected. Other risks can be diversified by selecting the right assets.

2: A

Common stock is part ownership of the company. The owners may or may not get dividend. They have limited liability but no fixed return is promised to them. It is neither a bond nor a CD which are forms of debt.

3: C

The periodic payment on a coupon is made by way of coupon rate which is a percentage of par value. It is paid at regular intervals. Current yield is Annual dividend/ Price. It is payment of par value and not the current price.

4: A

Callable bond gives the issuer the option to call back the bond before maturity. The holder, government and phone companies do not decide to call back the bond.

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