Jimmy just bought a new Ford SUV for his business. The price of the vehicle was $40,000. Jimmy made a $5,000 down payment and took out an amortized loan for the rest. The car dealership made the loan at 8% interest compounded monthly for five years. He is to pay back the principal and interest […]
Date: September 19th, 2020
Portfolio risk is typically measured by ________ while the risk of a single investment is measured by ________. A) security market line; standard deviation B) standard deviation; beta C) beta; standard deviation D) beta; slope of the characteristic line ANSWER C
Date: September 19th, 2020
Why should we be more concerned with the marginal tax rate rather than the average tax rate? What will be an ideal response? ANSWER For financial decision making, it’s the marginal tax rate rather than the average tax rate that we are concerned with. Why? Because, generally speaking, the marginal rate is the […]
Date: September 19th, 2020
Which of the following statements is false? A) Broker-dealers stand ready to buy and sell specific securities at selected prices. B) Brokers purchase securities for their own account. C) Most corporate bond trading takes place over the counter. D) none of the above ANSWER B
Date: September 19th, 2020
Which of following is NOT a variable in the equation for sustainable growth? A) profit ratio B) net working capital ratio C) asset turnover ratio D) leverage ratio ANSWER B
Date: September 19th, 2020
Examine the securities below and identify the security with the highest liquidity premium, the highest default risk premium, and the highest maturity premium. a. 30-year U.S. Government Treasury bond maturing in 2025 b. 25-year Bbb-rated corporate bond maturing in 2030, actively traded on the New York Exchange c. 10-year Aaa-rated corporate bond maturing in 2020, […]
Date: September 19th, 2020
Cranston Cranks Inc. is a manufacturer of high quality bicycle components. The firm’s levered beta is equal to 1.20. When added to a well-diversified portfolio that matches the market beta, the firm would ________ the portfolio beta. A) increase B) decrease C) not affect D) There is insufficient information to answer this question. […]
Date: September 19th, 2020
High Inc. has an accounts receivable turnover ratio of 7.3. Low Company has an accounts receivable turnover ratio of 5. Assuming that High and Low have the same sales level, which of the following statements is correct? A) Low Company has (on average) a lower accounts receivable balance than does High. B) High has a […]
Date: September 19th, 2020
Which of the following statements is TRUE? A) An advantage of a corporation is that there is less regulation of the business. B) An advantage of a corporation is that it is subject to double taxation. C) Unlike a partnership, a disadvantage of a corporation is that it has limited liability. D) Corporations face more […]
Date: September 19th, 2020
White’s World Wide Delivery Inc. has an unlevered beta = 1.25, a debt-equity ratio of 0.30, a tax rate of 0.20, and a levered beta = 1.55. If the firm increased the debt-equity ratio to 50%, what would be the impact on the levered beta? A) Increase to a value of 1.75 B) No change […]
Date: September 19th, 2020
