Draw a graph of a typical Treasury yield curve and discuss why it usually takes that shape. What will be an ideal response? ANSWER The student should draw a normal, upward-sloping yield curve as shown in the text. Factors impacting the shape of the yield curve are the risk free rate, the inflation […]
Date: September 19th, 2020
Profitability ratios capture both risk and return. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
________ analysis involves comparison of current to past performance and the evaluation of developing trends. A) Time-series B) Cross-sectional C) Marginal D) Break-even ANSWER A
Date: September 19th, 2020
The liquidity of a firm is measured by its ability to satisfy its short-term obligations as they come due. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Which of the following is used to analyze a firm’s financial performance over different years? A) time-series analysis B) break-even analysis C) gap analysis D) marginal analysis ANSWER A
Date: September 19th, 2020
Which of the following explains the general shape of the yield curve of a bond? A) Expectations theory B) Perfect market theory C) Capital asset pricing theory D) Securities market theory ANSWER A
Date: September 19th, 2020
Holding risk constant, the implementation of projects with a rate of return above the cost of capital will decrease the value of a firm, and vice versa. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
A single key ratio of a firm provides all the information required to judge the overall performance of the firm. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Due to inflationary effects, inventory costs and depreciation write-offs can differ from their true values, thereby distorting profits. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
The term structure of interest rates is the relationship between ________. A) the present value of principal and coupon rate of the bonds B) the general expectation of inflation and nominal rate of return for bonds C) the general expectation of inflation and real rate of return for bonds D) the maturity and rate of […]
Date: September 19th, 2020
