The capital asset pricing model A) provides a risk-return trade-off in which risk is measured in terms of beta. B) measures risk as the coefficient of variation between security and market rates of return. C) depicts the total risk of a security. D) provides a risk-return trade-off in which risk is measured in terms of […]
Compared to a publicly traded firm, a comparable private firm is thought to be up to 20% to 30% more valuable. Indicate whether the statement is true or false ANSWER FALSE
The financial management framework: A) examines the factors in the external environment in which the firm operates. B) elaborates on the three main cash-related activities of the firm. C) examines how value is created and measured. D) All of the above. ANSWER D
All of the following is a financing factor that impacts the firm’s leverage EXCEPT: A) debt financing. B) new equity. C) suppliers. D) marketing. ANSWER D
As the required rate of return of an investment decreases, the market price of the investment decreases. Indicate whether the statement is true or false ANSWER FALSE
Bill’s Bike Shop has a return on assets of 12%. Anton’s assets = $100 while Anton’s owner’s equity = $40 and its debt equals $60. What is Bill’s return on equity? A) 20% B) 30% C) 12% D) 18% ANSWER B
Federal deposit insurance insures each deposit you have with a bank up to $100,000. Indicate whether the statement is true or false ANSWER FALSE
You have decided to endow a Chair in Finance at Whatsamatta University. How much money must you deposit into the endowment account today if the Chair pays $125,000 per year forever (first payment one year from today) and is invested at a rate that pays out 4.50% per year? A) $277,777.78 B) $2,902,777.78 C) $2,777,777.78 […]
The yield curve in 2009 was very low, with short-term rates close to zero and long-term rates below 5 percent. What factors contributed to such low interest rates? What will be an ideal response? ANSWER In response to the banking and economic crises, the U.S. Government undertook policies to reduce interest rates in […]
Which of the following is the least likely to be included in the transition fund? A) Home mortgage B) Probate costs C) Funeral and burial costs D) Uninsured medical costs ANSWER A
