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Multiple-Choice Questions
Multiple-Choice Questions
yield curves are normally:
a premium bond is a bond:
if transactions cost are zero, there is no information asymmetry or personal taxes and bankruptcy is cost less, but corporate taxes exist and interest payments are tax-deductible, what is the optimal amount of debt to have?
if corporate and personal taxes exist, and interest payments are tax-deductible for corporations, would firms take on as much debt as possible?
what are the important disadvantages of debt in practice?
bankruptcy is bad for the following reasons:
if bankruptcy were costless and there were no information asymmetry, but interest payments are tax-deductible, what is the weighted average cost of capital?
the NY times in it's recent report on the sale of starwood hotels reported. "we do not believe Marriott is willing to incur earnings dilution to facilitate the transaction". Analysts at wellsfargo wrote in a research note on Monday. If earnings dilutions
the Modigliani-miller hypothesis assumes that there are no:
a probability distribution is:
an asset with a beta less than 1:
firms in the following sectors tend to have high betas:
market wide risk is more relevant for asset pricing than idiosyncratic risk because:
the crucial assumption that allows insurance to work is that:
which of the following is true? historical
it is often said to classify assets in different categories that vary in risk from a very safe class to very risky class. which of following is common list of such asset categories in order of increasing risk?
the following firms are likely to have high asset betas:
firms with the highest equity betas have:
the variance of asset returns is measured in the following units:
suppose we created portfolio of investments in different asset categories in 1925, with intial investment of $100, and dividends and interest reinvested in that same asset category, period after period. which of the following is an ordering of portfolio v
the CAPM is:
an efficient portfolio is one which:
a firms asset beta can be measured by:
an assets beta:
which of the following are true? finance
suppose the EMH holds. then, if the price of a given stock has been rising over the past 5 days.
the efficient markets hypothesis says that on assets current price reflects:
the discount rate to be used for discount cashflows from a project is:
the WACC is computed as the weighted average of the cost of equity and the cost of debt. the firm does not have any recently issued bonds. which of these statements is correct?
the WACC is used to discount project cashflows because:
your project manager has forecast savings from a proposed investment to most likely be $10M a year for the next 10 years. however he believes that there is a 10% chance that it will be $12M and a 10% that it will be $8M. you run the number's and discover
a firm believes that demand and supply conditions are likely to remain the same for the next 5 years, so that the number of units sold will remain constant. it also expects inflation to be 5% a year for the next 5 years. sales for the year just ended with
The WACC computation requires you to use the weighted average of the after tax cost of debt and the cost of equity, using appropriate proportions for debt and equity. your frims balance sheet shows $30M of debt and $70 of equity. the market value of your
the WACC is computed as weighted average of the cost of equity and the cost of debt. what would you use to compute the cost of equity?
the WACC is computed as weighted average of the cost of equity and cost of debt. which of the statements is correct? the cost of debt is:
true or false: even if there are no frictions or transaction costs, the same good in 2 different locations can sell for different locations.
the ask price is the price at which a trader stands ready to sell a unit of the good, the bid ask price of a good is the price at which a trader is willing to pay to buy a unit of a good. the bid ask price; i.e the difference between these 2 prices is usu
which of the following statements about the NPV rule are true?
a primary asset is defined as an asset that pays exactly 1 dollar at some point in time in the future. the price of such asset must be:
your finance professor asserts that the bid-ask spread is greater in the markets for physical goods like shoes than in financial markets. which of these statements is valid
a firms market value is usually greater than book value: (choose 1)
the current ratio( choose that apply):
the financial statements that public companies in the US are required to prepare are: (choose more than 1)
true or false: firms with high market to book ratios are likely to have higher earnings going forward.
working capital is:
true or false: one of the important assets in a company's GAAP balance sheet is the expertise and skills of its employees.
true or false: income items are recorded when they are earned and recorded deductions when expenses are incurred, regardless of when the cashflow actually occurs.
goodwill is:
tunneling is:
dual class share structures are corporate structures where only 1 class of shares may have voting rights, but all shares in dividend. which of following statements true?
which of the following statements about controlling shareholder groups reflect proper reasoning?
a proxy contest is:
takeovers are important in corporate governance for these reasons:
which of the following statements regard info provision by corporation is true?
what are some ways in which shareholders can affect company actions?
some ways which managers can entrench themselves to detriment of shareholders interest are:
what is sarbanes-oxley?
insider trading occurs when managers and other with access to privileged info that others don't have use info to trade. which statement true?
how respond to following comment: okay so the separation of ownership and management creates a conflict of interests between shareholders and managers, shareholders cannot be certain that managers will act in their interests as residual claimants. why is
what is the value of stocks and stock options given to managers in terms of corporate governance?
which of the following statements about managerial ownership of stock options and corporate governance is true?
the conflict of interest between managers and shareholders in a corporation is because of:
how does separation of ownership and management benefit managers?
are there any advantages to separation of ownership and management in a corporation?
corporate governance is:
what is captured board?
what is the evidence regarding board size?
the adverse selection aspect of a seasoned equity offering manifests itself in:
the following are primary ways in which economic resources can be transferred over time
the financial system transfers economic resources over space when:
the trading of financial securities in organized markets:
we need a payment system:
the following is not an example of how the financial system allows the pooling of resources.
this is not one of the reasons for a clearing system to manage payments between parties such as banks and stock exchange members
the primary function of a financial system is:
an interchange fee:
which one of these is not an example of how the financial system provides ways of dealing with the incentive problems created when 2 parties transact with each other?
the following is not a primary method of transferring risk.
which of these is not a function of the financial system?
which 1 of these is usually not considered a determinant of expected real rate of return on investment:
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