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Test 1 Fin326
| Question | Choices | Answers |
|---|---|---|
| Which of the following is NOT a way that a firm can increase its dividend? | A)by increasing its dividend payout rate B)by increasing its retention rate C)by increasing its earnings (net income) D)by decreasing its shares outstanding | B) by increasing its retention rate |
| A portfolio of stocks can achieve diversification benefits if the stock that comprise the portfolio are | A)perfectly correlated B)susceptible to common risks only C)not perfectly correlated D)both B and C | C) not perfectly correlated |
| In general, it is possible to eliminate ______ risk by holding a large portfolio of assets | A)unsystematic B)unsystematic and systematic C)systematic D)none of the above | A) unsystematic |
| as we increase the number of stocks in a portfolio, the standard deviation of returns of the portfolio | A)decreases B)remains unchanged C)increases D)none of the above | A) decreases |
| Which of the following is NOT a diversifiable risk? | A)the risk of a product liability lawsuit B)the risk that the CEO is killed in a plane crash C)the risk that oil prices rise, increasing production costs D)the risk of a key employee being hired away | C) the risk that oil prices rise, increasing production costs. |
| If you build a large enough portfolio, you can diversify away all ______ risk, but you will be left with _______ risk. | A)unsystematic, systematic B)diversifiable, unsystematic C)systematic, undiversifiable D)diversifiable, diversifiable | A) unsystematic, systematic |
| What is the real interest rate given a nominal rate of 8% and an inflation rate of 4.5%? | A)3.3% B)4.9% C)4.5% D)8.0% | A) 3.3% 1.08 ---- - 1 = .03349 1.045 |
| what, typically, is used to calculate the opportunity cost of capital on a risk-free investment? | A) the interest rate on U.S. Treasury seurities with the same term B)the best available expected return offered in any investment available in the market C)the best rate of return offered by U.S. treasury securities D)the interest rate of any investmen | A)the interest rate on U.S. Treasury securities with the same term |
| whcih of the following accounts has the highest EAR? | A)one that pays 3% every three months B)one that pays 6.1% every 6 months C)one that pays 12.6% per year D)one that pays 1.0% per month | D) one that pays 1.0% per month N = # of payments I = % PV= 100 FV ===== _____ which has most |
| whcih of the following need to be true for an asset to be considered liquid? | Test #1 question #1 | A) it can be easily bought and sold and the selling price is very close to the buying price at a given point in time. |
| Given that the inflation rate in 2006 was about 3.24%, while a short term municipal bond offered a rate of 2.9% which of the following statement is correct? | Test #2 question #2 | C)investors in these bonds were able to buy less at the end of the year than they could have purchased at the start of the year. |
| Which of the following is the overarching principal that a financial manager should follow when making decisions? | Test #1 question 2) | A)Decision should increase the value of the firm to its investors |
| What is the Bid-Ask spread | Test 1 question 3 | B) the difference in price available for an immediate sale of a stock and the immediate purchase of that stock |
| like other metals, uranium 308 is traded in competitive markets like the New York Metals Exchange. Which of the following would most likely value a given weight of uranium 308 the most? | Test 1 queston 4 | D) all buyers and sellers would have the same value for 250 pounds of uranium |
| how do the shareholders of most corporations exercise their control of that corporation? | Test 1 question 5 | C) by electing member of a board of directors |
| how much would you pay for a share of BHP Billiton sock? last trade $41.91 | A)$41.59 B)$41.93 C)$41.65 D)$41.91 | B) 41.93 |
| A typical company has many types of shareholders, from individuals holding a few shares, to large institutions that hold very large numbers of shares. How does a financial manager ensure that the priorities and concerns of disparate stockholders are met? | test 1 q 7 | B) ingeneral, all shareholders will agree that they are better off if the financial manager works to maximize the value of their investment. |
| Which of the following would be best considered to be a principal-agent problem in the behavior of the following financial managers? | Test 1 question 8 | B) bill choosesto pursue a risky investment and the company's funds, because his compensation will substantially rise if it succeeds. |
| Which of the following statements is FALSE? | Test 4 question 1 | A) if the cost of capital estimate is more than the internal rate of return (IRR), the net present value (NPV) will be positive |
| Test 4 question 2 | Test 4 question 2 | C) rule I only |
| you are trying to decide between three mutually exclusive investment opportunities. The most appropriate tool for identifying the correct decision is: | A) NPV B) Internal rate of return (IRR) C)Profitability index D) incremental internal rate of return | A) net present value |
| the relative proportion of debt, equity, and other securities that a firm has outstanding constitute its | A)Asset ratio B)capital structure C)current ratio D)none of the above | B) capital structure |
| Apple computers has raised all its capital via equity rather than debt. such a firm is also referred to as an ____ firm | A)margined B)risk less C)unlevered D)levered | C) unlevered |
| the total market value of general motors is $10 billion, market value of $7 of equity and face value of $10 of debt, what are the weights in equity and debt that are used for calculating the WACC? | A).3,.7 B).7,.3 C).6,.4 D)cannot be determined | B).7, .3 e 7/10 a 3/10 |
| When corporate tax rates decline, the net cost of debt financing | A)increases B)decreases C)is unchanged D)none of the above | A) increases |
| An investor has a budget of $10 million. He can invest in the projects shows above. If the cost of capital is 6% what investment or investments should he make? | A)project A B)Project B C)project B and D D)Project C and D test 4 question 8 | D) project C and D N= # of years I = 6% PV = -IV PMT = cash flow FV ==== NPV take highest |
Created by:
muhls54