Name the benefits derived from the existence of stock exchanges. What will be an ideal response? ANSWER Providing a continuous market: it may be the most important function of an organized security exchange. A continuous market provides a series of continuous security prices. Establishing and publicizing fair security prices: An organized exchange permits […]
DuPont analysis indicates that the return on equity may be boosted above the return on assets by using leverage (debt). Indicate whether the statement is true or false ANSWER TRUE
You are considering a sales job that pays you on a commission basis or a salaried position that pays you $50,000 per year. Historical data suggests the following probability distribution for your commission income. Which job has the higher expected income? Commission Probability of Occurrence $15,000 .15 $35,000 .20 $48,000 .35 $67,000 .22 $80,000 .18 […]
At what rate must $287.50 be compounded annually for it to grow to $650.01 in 14 years? A) 6 percent B) 7 percent C) 5 percent D) 8 percent ANSWER A
Patricia purchased a Personal Auto Policy (PAP). Her car was rear-ended by a driver who fled the scene. Patricia suffered whiplash, migraine headaches, and she was unable to work. Which of the following coverages will cover her lost work earnings? A) medical payments B) uninsured motorists C) underinsured motorists D) bodily injury liability […]
A vehicle is considered a constructive total loss when A) it cannot be repaired. B) the repair cost exceeds the actual cash value. C) it can be repaired, but the insured prefers a cash settlement. D) it can be repaired, but the insurer prefers a cash settlement. ANSWER Answer: B
The Securities and Exchange Commission (SEC) A) regulates both primary and secondary markets. B) regulates initial public offerings, but not seasoned equity offerings, in the primary market. C) regulates only initial public offerings, or IPOs. D) regulates only primary market transactions to ensure investors are provided with adequate and accurate information on new securities. […]
Common stockholders’ equity equals common stock issued minus treasury stock. Indicate whether the statement is true or false ANSWER FALSE
Investors generally don’t like risk. Therefore, a typical investor A) will only accept a zero return if the risk is zero. B) will not be induced to take on any risk. C) will only take on additional risk if he expects to be compensated in the form of additional return. D) will only take on […]
Rob purchased a Personal Auto Policy (PAP) with collision and other-than-collision coverage. Which of the following losses would be covered under his policy? A) Rob wrecked his car while using it as a taxi cab. B) Thieves took Rob’s radar detector from his car. C) A flash flood washed Rob’s car off the road and […]
