John won the lottery on Monday and can take either $50,000 per year for 20 years, or $500,000 today. Bill won the same lottery on Tuesday and has the same options for receiving the cash. A well respected financial advisor is hired by both John and Bill. The advisor recommends that John take the $50,000 […]
Date: September 19th, 2020
Short-term United States Treasury bills are widely used as proxies for risk-free assets, yet the returns on these T-bills are consistently greater than zero. Is this consistent with the concept of a risk-return trade-off? What will be an ideal response? ANSWER Yes. Investors also require a return for delaying consumption as well as […]
Date: September 19th, 2020
Some states have enacted laws which prohibit uninsured drivers from suing a negligent driver for noneconomic damages, such as pain and suffering. These laws are called A) comparative negligence laws. B) “no pay, no play” laws. C) financial responsibility laws. D) unsatisfied judgment laws. ANSWER Answer: B
Date: September 19th, 2020
Stock W has an expected return of 12% with a standard deviation of 8%. If returns are normally distributed, then approximately two-thirds of the time the return on stock W will be A) between 4% and 20%. B) between -4% and 28%. C) between 12% and 20%. D) between 8% and 12%. ANSWER […]
Date: September 19th, 2020
In chapter 6, Projecting Financial Requirements and Managing Growth, the author focuses on three critical questions to examine the firm’s financial future. Which of the following questions is NOT addressed by the author in this chapter? A) How much and what type of financing will be required to meet goals and expectations? B) How do […]
Date: September 19th, 2020
You have a savings bond that will be worth $750 when it matures in 3 years, but you need cash today. If the current going rate of interest is 5%, what is your bond worth if you sell it today (rounded to the nearest dollar)? A) $675 B) $612 C) $625 D) $648 […]
Date: September 19th, 2020
Ratio analysis enhances our understanding of three basic attributes of performance: liquidity, profitability, and the ability to create shareholder value. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Which of the following statements is true regarding unsatisfied judgment funds? A) An accident victim can choose to collect from the negligent driver or from the fund. B) The negligent driver is relieved of legal responsibility when the fund makes a payment to the accident victim. C) The maximum amount an individual can collect from […]
Date: September 19th, 2020
Profit maximization is NOT an adequate goal of the firm when making financial decisions because: A) it does not necessarily reflect shareholder wealth maximization. B) it ignores the risk inherent in different projects that will generate the profits. C) it can over-emphasize a project’s short-term returns. D) All of the above. ANSWER D
Date: September 19th, 2020
One benefit payable under a typical no-fault plan is “essential services expenses.” Which of the following would be covered under this benefit? A) funeral expenses B) housekeeping expenses C) hospital bills D) loss of income ANSWER Answer: B
Date: September 19th, 2020
