Karteikarten im Karteikarten-Set

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A "straddle" is a combination of:

A long position in a put option and a long position in a call option with the same strike price and expiration date

Many people claim that because of the separation of ownership and control in a corporation, managers have little incentive to work in the interest of the shareholders when this means working against their own self-interest. This is the:

Agency Problem

What do market makers provide to markets?

Liquidity

A corporate bond which recevies a C rating from Standard and Poor's is considered:

A speculative bond

What does the incremental IRR show?

Indicates the discount rate at which the optimal project choice changes

What is a growing perpetuity?

Is a cash flow stream that occurs at regular intervals and grows at a constant rate forever

What is the appropriate discount rate for a cash flow?

It's the rate of return available in the market on other investment of comparable risk and term

Leverage increases...

The risk to the firm's equity holders

A firm's net debt equals...

Total debt minus Cash and minus Short-term Investments

Interest rates vary...

with time horizons

Your boss asks you to value the stock of a company that has constant earnings growth but varies in how it pays out these earnings to shareholders between dividends and share repurchases. The best model you can use in this case is the:

Total Payout model

What does the Efficient Market Hypothesis imply?

That securities will be fairly priced, based on future cash flows, given all information that is available to investors

What is true about excess returns?

It is the difference between the average return for this investment and the average return for Treasury Bills (risk-free rate)