 | Concept Review Questions
(See related pages)
- Fill in the blanks: The market value of a bond is the present value of its ________ and __________ payments. (page 58 of the book)
- What is meant by a bond's yield to maturity and how is it calculated? (page 58 of the book)
- If interest rates rise, do bond prices rise or fall? (page 59 of the book)
- If interest rates change, do prices of long bonds change by more or less than those of short bonds? (page 59 of the book)
- If a U.S. Treasury bond is quoted to yield 6%, is the annual compound yield more or less than 6%? (pages 59-60 of the book)
- What is the difference between an auction market and a dealer market? (page 61 of the book)
- Write down the DCF formula for the value of a stock. (pages 63-64 of the book)
- The present value of a stock should not depend on how long the investor expects to hold it. Explain why. (pages 62-64 of the book)
- If dividends are expected to grow at a constant rate forever, what is the value of the stock? (page 65 of the book)
- What is a two-stage DCF model? When would you want to use one? (pages 69-71 of the book)
- Suppose a firm is investing and expanding rapidly. Does that necessarily mean its shares are growth stocks? (pages 73-75 of the book)
- What is meant by PVGO? Why do the shares of companies with valuable PVGO trade at low earnings-price ratios? (page 73 of the book)
- Is the earnings-price ratio a good measure of the cost of equity? Why or why not? (page 73 of the book)
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