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Lecture 2

HLST 3250 Lecture 2: 10

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Health Studies
HLST 3250
Ellen Schraa

Chapter 10 Valuation and Rates of Return 1. The valuation of a financial asset is based on the concept of determining the present value of future cash flows. True False 2. The prices of financial assets are based on the expected value of future cash flows, discount rate, and past dividends. True False 3. The market determined required rate of return is also called the discount rate. True False 4. The discount rate depends on the markets perceived level of risk associated with an individual security. True False 5. By using different discount rates, the market allocates capital to companies based on their risk, efficiency, and expected returns. True False 6. In estimating the market value of a bond, the coupon rate should be used as the discount rate. True False 7. Most bonds promise both a periodic return and a lumpsum payment. True False 8. A 10year bond pays 6 annual interest in semiannual payments. The current market yield to maturity is 4. The appropriate interest factors should be in the tables under 2 for 20 periods. True False 9. The price of a bond is equal to the present value of all future interest payments added to the present value of the principal. True False 1
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