Which of the following is NOT a positive attribute of the price-earnings multiple valuation model? A) It is easy to use. B) It implicitly assumes that comparable firms are already fairly pried in the market place. C) It is forward-looking. D) It is based on relative market measures rather than book measures. ANSWER […]
From the saver’s point of view, the best method of computing interest is the day of deposit day of withdrawal method. Indicate whether the statement is true or false ANSWER TRUE
An open-end fund differs from a closed-end fund in that the open-end fund does not limit the kinds of securities it buys. Indicate whether the statement is true or false ANSWER FALSE
The higher your credit score, the easier it is to obtain credit. Indicate whether the statement is true or false ANSWER TRUE
Firms attempt to price bonds so that at issue they sell for the: A) face value. B) coupon value. C) firm value. D) same price as shares of preferred stock. ANSWER A
Security A has an expected rate of return of 29.8 percent and a beta of 3.1. Security B has a beta of 1.70. If the Treasury bill rate is 5 percent, what is the expected rate of return for Security B? What will be an ideal response? ANSWER Use A to determine the […]
The “beneficiaries” named on an insurance policy are those who A) own the policy. B) buy the policy. C) issue the policy. D) are protected by the policy. ANSWER D
Why does the future value of a given amount increase when interest is compounded nonannually as opposed to annually? What will be an ideal response? ANSWER Because “interest is earned on interest” more frequently as the length of the compounding period declines, there is an inverse relationship between the length of the compounding […]
Last National Bank is offering you a loan at 10%; payments on the loan are to be made monthly. Credit Onion is offering you a loan where payments are to be made semiannually; the rate on the loan is also 10%. Local Bank down the street is also offering a loan at 10% where the […]
As a rough guideline when using price-earnings multiples, keep in mind that the market-wide price-earnings multiples have historically averaged around: A) 24 to 25. B) 20 to 21. C) 16 to 17. D) 12 to 13. ANSWER C
