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True-Or-False Questions
True-Or-False Questions
True or False: Since 1950, the participation rate in the United States has remained roughly constant at 60%.
true or false: zero coupon bonds sometimes sell for more than their face value.
true or false: the quoted price of a coupon bond is what the buyer pays for it
true or false: premium bond prices tend to increase overtime.
true or false: a yield curve plots the yields on bonds overtime.
true or false: the yield to maturity on US bonds is usually expressed as an annualized percentage rate.
true or false: coupons on US bonds are usually paid out once a year.
true or false: long term bond prices are less volatile than short term bond prices.
true or false: long term bond yields are less volatile than short-term bond yields.
true or false: the holding period return is just another name for the bond yield they both measure the return to the investor.
true or false: as the bond yield increases, the bond becomes more valuable to the investors and therefore, the price increases.
true or false: the coupon rate on a bond measures the investors return on their investment.
true or false: managers acting on behalf of shareholders be less likely to pay excessive dividends when a firm is in trouble because the firm needs to keep all the financial resources it has.
true or false: leverage should have no impact on human resource manangement.
true or false: bondholders do not have to worry about opportunities managerial actions because they can always use bond covenants to specify what a manager can or cannot do.
true or fasle: there is a lot of cross-sectional variation in debt-equity ratios, but they do not vary systematically across industries.
true or false: firms selling durable goods are more affected by financial distress than firms selling nondurable goods.
true or false: according to the Modligliani-Miller hypothesis, if a firm does an equity-for-debt swap, but does not change the operations of the firm, the sum total of the firms debt and equity will not change.
true or false: according to the Modigliani- miller hypothesis, the value of the firm is determined by its operations, not by its financial structure
true or false: according to the Modigliani-Miller, choosing the right structure can increase the value of the firm.
true or false: under modigliani-miller , the value of the firm is independent of its capital structures, but the weighted average cost of capital still depends on the capital structures.
true or false: If the modigliani miller hypothesis holds, the firms cost of capital depends on how close is to the firms optimal leverage.
if there are no transactions costs or information assymmetry but interest on debt is deductible by the firm, then the value of the firm will be increasing in the amount of debt used in financing the firm.
true or false: if the MM(Modigliani-miller) hypothesis holds, the risk of equity does not change as we increase the leverage of the firm.
issuing equity is bad for existing shareholders because it dilutes earnings. new shareholders have claims to the firms earnings, so existing shareholders are worse off. as a result, stock prices drop. Is this true or false?
true or false: according to the modligliani-Miller hypothesis, if a firm does an equity-for-debt swap, but does not change the operations of the firm, the value of the firm's equity will not change.
your friend makes the following argument: if there are no transaction costs, taxes or information asymmetry, as we increase the leverage of the firm, the risk of equity will increase. Consequently, stock holders will require a higher rate of return. the f
true or false: the following is idiosyncratic risk: the risk that your firm X's employees will be hired away by competitors.
true or false: the market risk premium is always positive.
true or false: an investor should not concern herself with firm-specific uncertainty even if she holds only equity of 1 particular firm.
true or false: the following is idiosyncratic risk: the risk that the new product firm X's manager expects his R&D division to produce will not materialize.
true or false: the standard error of estimate of the expected return is higher than the standard deviation of returns.
true or false: the risk premium for every asset is positive.
true or false: standard deviation is a good measure of risk for somebody who is primarily worried about loss of capital.
which statement is true? empirical
true or false: the following is idiosyncratic risk: the risk that the economy slows, decreasing demand for firm X;s products
true or false: according to the CPM, the risk for a security with high diversifiable risk and high systematic risk is grater than the risk premium for a security with low diversifiable risk and high systematic risk.
true or false: the following is idiosynatic risk: the risk that the main production plant of company X is shut down due to a tornado
true or false: insurance policies are useful primary because they transfer risk from one party to another.
true or false: a theoretical probability distribution can be described using more parameters than an empirical frequency distribution.
true or false: the geometric mean is greater than the arithmetric mean.
true or false: the following is idiosyncratic risk: the risk that the Fed will increase interest rates, thus decreasing demand for real estate company X's products.
true or false: stock market investors should read online or text publications to find out which stocks are overpriced and which are underpriced. this will allow them to increase the value of their portfolio.
true or false: if changes in prices are unpredictable, that is evidence against market hypothesis.
true or false: in practice, analyzing fundamental information about a stock from its financial statements or elsewhere is pointless because prices have already incorporated that information.
true or false: for the EMH to be true, all investors should have enough wealth to buy and sell.
true or false: for the EMH to be true, all investors would need to be sophisticated
true or false:according to the EMH, when a firm announces a new capital budgeting project, the price of the firms stock should increase.
true or false: empirically, it is true that stock prices incorporate privately held information even before they become public.
true or false: the efficient market hypothesie says that financial markets are efficient- they have minimum operational costs of running the market.
true or false: firms are allowed to compute income in one way for reporting purposes and in another way for tax computation purposes
true or false: moral hazard and adverse selection are both problems of information asymmetry
true or false: is there a moral hazard element in an acquisition transaction with payment in cash?
true or false: selling a used car involves adverse selection
true or false: making an initial public offering or a second equity offering on a stock exchange company involves adverse selection
true or false: the real rate of return is the rate of return if computed in terms of the dollar amount obtained at the end of the period relative to the dollar amount given up at the beginning of the period
true or false: using a car mechanic to inspect the car will reduce if not resolve the adverse selection problem.
true or false: there is never a moral hazard element in an acquisition transaction
true or false: financial markets encourage the generation of information by entities that have comparative advantage in such research
true or false: a sale of a cup of coffee is a financial contract.
true or false: an agreement by tom to sell a cup of coffee to fred in 2 days is a financial contract
true or false: finance has nothing to do with economics
mathematic
True or false
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