Please answer following:
1. The purpose of secondary trading is to
provide liquidity and competition between investments.
provide a market for securities not handled in primary trading.
provide jobs for brokers and dealers.
provide lower commissions than on the organized exchanges.
2. Corporations prefer bonds over preferred stock for financing their operations because
preferred stocks require a dividend.
bond interest rates change with the economy while stock dividends remain constant.
the after-tax cost of debt is less than the cost of preferred stock.
none of the above
3. Security markets provide liquidity
by allowing corporations to raise funds by selling new issues.
by creating a market in which owners may easily turn an investment into cash through its sale.
a and b are both correct.
neither a nor b are correct.
4. A corporation's board of directors:
is selected by and can be removed by management.
can be voted out of power by the shareholders.
has a lifetime appointment to the board.
is selected by a vote of all corporate stakeholders.
5. If you only had an extra $225 per month, what is the largest car payment you could pay if "i" = 8% per year and you had 5 years to pay.
6. Using higher discount rates:
accelerated cost recovery depreciation is more valuable than straight line.
straight-line depreciation is more valuable than the accelerated cost recovery system of depreciation.
depreciation policy makes no difference.
later year depreciation has a higher net present value.
7. The pre-tax cost of debt for a new issue of debt is determined by:
the investor's required rate of return on issued stock.
the coupon rate of existing debt.
the yield to maturity of outstanding bonds.
all of the above.
8. The market allocates capital to companies based on (Points: 1)
risk.
efficiency.
expected returns.
all of the above
9. A higher interest rate (discount rate) would:
reduce the price of corporate bonds.
reduce the price of preferred stock.
reduce the price of common stock.
all of the above.
10: The cost of capital for common stock is ke=(D1/Po)+g. What are the assumptions of the model:
Growth (g) is constant to infinity.
The price earnings ratio stays the same.
The firm must pay a dividend to use this model.
All of the above are assumptions of the model.
11. A bond which has a yield to maturity greater than its coupon interest rate will sell for a price
below par.
at par.
above par.
what is equal to the face value of the bond plus the value of all interest payments.
12. The risk premium is likely to be highest for (Points: 1)
U.S. government bonds
corporate bonds
gold mining expedition
either b or c
13. Although debt financing is usually the cheapest component of capital, it cannot be used to excess because
interest rates may change.
the firm's stock price will increase and raise the cost of equity financing.
the financial risk of the firm may increase and thus drive up the cost of all sources of financing.
underwriting costs may change.
14. The pre-tax cost of debt for a new issue of debt is determined by
the investor's required rate of return on issued stock.
the coupon rate of existing debt.
the yield to maturity of outstanding bonds.
all of the above.
15. Corporations that do not issue financial securities such as stock or debt obligations:
will not be able to increase sales.
cannot be profitable.
generate sufficient funds to fulfill their needs.
do not face double taxation of their profits.
16. When Patricia sells her General Motors common stock at the same time that Brian purchases the same amount of General Motors stock, General Motors receives:
the "spread" between the Bid and Ask of the transaction.
the dollar amount of the transaction, less brokerage fees.
only the par value of the common stock.
nothing.
17. With a Subchapter S corporation
income is taxed as direct income to stockholders.
stockholders have the same liability as members of a partnership.
the number of stockholders is unlimited.
life of the corporation is limited.
18. The residual income of the firm belongs to
creditors.
preferred stockholders.
common stockholders.
bondholders.
19. The efficient market hypothesis deals primarily with
businesses.
households.
government.
financial institutions.
20. Agency theory deals with the issue of
when to hire an agent to represent the firm in negotiations.
the legal liabilities of a firm if an employee, acting as the firm's agent, injures someone.
the limitations placed on an employee acting as the firm's agent to obligate or bind the firm.
the conflicts that can arise between the viewpoints and motivations of a firm's owners and managers.
21. The financial markets allocate capital to corporations by
reflecting expectations of the market participants in the prices of the corporation's securities.
requiring higher returns from companies with lower risk than their competitors
rewarding companies with expected high returns with lower relative stock prices
relying on the opinion of investment bankers
22. An item which may be converted to cash within one year or one operating cycle of the firm is classified as a
current liability.
long-term asset.
current asset.
long-term liability.
23. The best indication of the operational efficiency of management is
net income.
earnings per share.
earnings before interest and taxes (EBIT).
gross profit.
24. The major limitation of financial statements is
in their complexity.
in their lack of comparability.
in their use of historical cost accounting.
in their lack of detail.
25. A firm with earnings per share of $5 and a price-earnings ratio of 15 will have a stock price of
$20.00
$75.00
$3.00
the market assigns a stock price independent of EPS and the P/E ratio.
26. Depreciation is a source of cash inflow because
it is a tax deductible noncash expense.
it supplies cash for future asset purchases.
it is a tax deductible cash expense.
it is a taxable expense.
27. Assuming a tax rate of 35%, depreciation expenses of $1,000,000 will
reduce income by $350,000.
reduce taxes by $350,000.
reduce taxes by $650,000.
have no effect on income or taxes, since depreciation is not a cash expense.
28. A firm has $200,000 in current assets, $400,000 in long-term assets, $80,000 in current liabilities, and $200,000 in long-term liabilities. What is its net working capital? (Points: 1)
$120,000
$320,000
$520,000
none of the above
29. Assuming a tax rate of 50%, the after-tax cost of a $200,000 dividend payment is (Points: 1)
$200,000
$100,000
$-100,000
none of the above.
30. In examining the liquidity ratios, the primary emphasis is the firm's
ability to effectively employ its resources.
overall debt position.
ability to pay short-term obligations on time.
ability to earn an adequate return.
31. Some analysts believe that the term structure of interest rates is determined by the behavior of various types of financial institutions. This theory is called the (Points: 1)
expectations hypothesis.
segmentation theory.
liquidity premium theory.
theory of industry supply and demand for bonds.
32. Total asset turnover indicates the firm's
liquidity.
debt position.
ability to use its assets to generate sales.
profitability.
33. A firm's long term assets = $75,000, total assets = $200,000, inventory = $25,000 and current liabilities = $50,000. (Points: 1)
current ratio = 0.5; quick ratio = 1.5
current ratio = 1.0; quick ratio = 2.0
current ratio = 1.5; quick ratio = 2.0
current ratio = 2.5; quick ratio = 2.0
34. The ABC Corp. had net income before taxes of $400,000 and sales of $2,000,000. If it is in the 50% tax bracket its after-tax profit margin is:
5%
10%
20%
25%
35. A firm has total assets of $2,000,000. It has $900,000 in short-term debt. The stockholders equity is $900,000. What is the total debt to asset ratio?
45%
40%
55%
none of the above
36. A firm has a debt to equity ratio of 50%, debt of $300,000, and net income of $90,000. The return on equity is
60%
15%
30%
not enough information
37. What is your monthly mortgage payment on a loan for $150,000, at 6% for 20 years?
$899.33
$1,265.79
$1,074.65
$1,089.91
38. A firm has forecasted sales of $30,000 in April, $45,000 in May and $60,000 in June. All sales are on credit. 30% is collected the month of sale and the remainder the following month. What will be balance in accounts receivable at the beginning of July?
lower will be the firm's need to borrow.
higher will be the firm's need to borrow.
more rapidly credit sales will be paid off.
more the firm can buy raw materials on credit.
39. A rapid rate of growth in sales and profits may require
higher dividend payments to shareholders.
increased borrowing by the firm to support the sales increase.
the firm to be more lenient with credit customers.
sales forecasts to be made less frequently.
40. If a firm has a break-even point of 20,000 units and the contribution margin on the firm's single product is $3.00 per unit and fixed costs are $60,000, what will the firm's net income be at sales of 30,000 units?
$90,000
$30,000
$15,000
$45,000
41. A conservative financing plan involves
heavy reliance on debt.
heavy reliance on equity.
high degree of financial leverage.
high degree of combined leverage.
42. If the price per unit decreases because of competition but the cost structure remains the same
the breakeven point rises.
the degree of combined leverage declines.
the degree of financial leverage declines.
All of the above
43. Risk exposure due to heavy short-term borrowing can be compensated for by
carrying highly liquid assets.
carrying illiquid assets.
carrying longer term, more profitable current assets.
carrying more receivables to increase cash flow.
44. Assuming a tax rate of 45%, the after-tax cost of interest expense of $200,000 is
$110,000
$140,000
$200,000
$90,000
45. Which of the following techniques allows explicit consideration of more than one possible outcome?
Operating leverage
Present value
Least-squares regression
Expected value
46. Under normal conditions (70% probability), Financing Plan A will produce $24,000 higher return than Plan B. Under tight money conditions (30% probability), Plan A will produce $40,000 less than Plan B. What is the expected value of return for Plan A over Plan B?
$28,800
$4,000
$4,800
$35,200
47. The belief that investors require a higher return to entice them into holding long-term securities is the viewpoint of the
the expectations hypothesis.
segmentation theory.
the liquidity premium theory.
market credit crunch theory.
48. What is generally the largest source of short-term credit small firms?
Bank loans
Commercial paper
Installment loans
Trade credit
49. As mergers, acquisitions, and restructuring have increased in importance in the 1980s, agency theory has become more important in assessing whether
a stock repurchase should be undertaken.
shareholder goals are truly being achieved by managers in the long run.
managers are actually agents or only employees of the firm.
managers and owners are actually the same people with the same interests.
50. The extent to which inventory financing may be used depends on
marketability of pledged goods.
price stability of goods.
perishability of goods.
all of the above
51. At age 5, how much would you have to save per month to have $1 million in your account at age 65, if your investment rate was 10% per year? Assume no taxes and compounding on a monthly basis.
$213.30
$21.23
$274.60
can't be done with these assumptions.
52. A dollar today is worth more than a dollar to be received in the future because
risk of nonpayment in the future.
the dollar can be invested today and earn interest.
inflation will reduce purchasing power of a future dollar.
None of the above.
53. The term structure of interest rates
changes daily to reflect current competitive conditions in the money and capital markets.
plots returns for securities of different risk.
shows the relative interest spread between bonds with different risk ratings such as AAA, AA, A, BBB, etc.
depicts interest rates for T-bills over the last year.
54. As the interest rate increases, the present value of an amount to be received at the end of a fixed period
increases.
decreases.
remains the same.
Not enough information to tell.
55. The Carter Company's bonds mature in 10 years have a par value of
$1,000 and an annual coupon payment of $80. The market interest rate for the bonds is 9%. What is the price of these bonds?
$935.82
$941.51
$958.15
$964.41
$979.53
Are you serious? Do you really think that anyone is going to do your work for you?
yes
the financial markets allocate capital to corporations by:
The Carter Company's bonds mature in 10 years have a par value of
$1,000 and an annual coupon payment of $80. The market interest rate for the bonds is 9%. What is the price of these bonds? Show me how it's done.
30,000
is selected by vote of all stake holders
If a firm has a break-even point of 20,000 units and the contribution margin on the firm's single product is $3.0 per unit and fixed cost are $60,000, what will the firm's net income be at sales of 30,000 units?
1
dude
1
935.82
Under normal conditions (70% probability), Financing Plan A will produce $24,000 higher return than Plan B. Under tight money conditions (30% probability), Plan A will produce $40,000 less than Plan B. What is the expected value of return for Plan A over Plan B?
question 13
below par
20-year, $1,000 par value bond has a 9% annual coupon. The bond currently sells for $925. If the yield to
maturity remains at its current rate, what will the price be 5 years from now?
Hello,
I have a research about September 11 2001 crash
so i need to know
the action taken by :
Market management in the stock exchange
I don't understand what is meant by market management
can anyone tell me or give me example i would be thankful
Thanks
Karim