Cumulative Abnormal Returns (CAR)

question 30

Multiple Choice

Cumulative abnormal returns (CAR)

• A)are used in event studies.
• B)are better measures of security returns due to firm-specific events than are abnormal returns (AR).
• C)are cumulated over the period prior to the firm-specific event.
• D)A and B.
• E)A and C.

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Definitions:

Callable Bonds

Securities that the issuer has the option to repurchase prior to their due date at a predetermined price.

Bond Indenture

A legal contract between a bond issuer and a bondholder that details the terms of the bond, such as the coupon rate, maturity date, and obligations of the issuer.

Bond Premium

The amount by which the market price of a bond exceeds its face value, often occurring when the bond's interest rate is higher than current market rates.

Semiannual Interest

Interest on a loan or security that is calculated and paid twice a year.