Assume that an investor is offered a choice of a risk-free government bond that is expected to return 3.5% or a high-risk corporate stock. According to one of the principles of finance, what would induce the investor to purchase the corporate stock? A) a return that is substantially higher than 3.5% B) cash dividends C) […]
The difference between the price the corporation gets and the public offering price is called the broker-dealer spread. Indicate whether the statement is true or false ANSWER FALSE
Which of the following statements is true with respect to a pure no-fault auto insurance plan? A) Under such a plan, you would collect from your own insurer and retain the right to sue the other party if your injuries surpass a dollar or verbal threshold. B) Most no-fault plans that have been adopted by […]
A no-fault law under which benefits are paid to an accident victim without regard to fault and the accident victim can still sue the negligent driver who caused the accident is referred to as a(n) A) pure no-fault law. B) add-on no-fault law. C) modified no-fault law. D) choice no-fault law. ANSWER Answer: […]
A rational investor will always prefer an investment with a lower standard deviation of returns, because such investments are less risky. Indicate whether the statement is true or false ANSWER FALSE
Which statement concerning towing and labor coverage under the PAP is (are) true? I. There’s no coverage for towing if the auto breaks down—towing is only covered if the auto needs to be towed after a collision has occurred. II. Towing and labor coverage pays for repairs at a service station or garage. A) I […]
Gary purchased a Personal Auto Policy (PAP) that included collision coverage. Gary lost control of his vehicle on an icy road. He slid across the center line into oncoming traffic. Another vehicle hit his car, causing severe damage to it. Ignoring any deductible, what is the insurer’s liability for damage to Gary’s car? A) the […]
One weakness of the times interest earned ratio is that it includes only the annual interest expense as a finance expense and ignores other financing items such as lease payments that must be paid. Indicate whether the statement is true or false ANSWER TRUE
Consider the after-tax cash flows for Project S and Project L: Project S Project L Year 1 $3000 0 Year 2 0 $3000 A rational person would prefer ________. A) Project L because they can avoid taxes by receiving cash flows later B) Project S because the money can be reinvested sooner C) information about […]
Explain the difference between (a) public offerings and private placements, (b) primary markets and secondary markets, (c) the money market and the capital market, and (d) organized security exchanges and over-the-counter markets. What will be an ideal response? ANSWER In a public offering, securities are usually made available to the public at large […]
