Joe, a risk-averse investor, is trying to choose between investment A and investment B. If investment A is riskier than investment B and Joe selects investment A anyway, then A) the expected return for investment A will be higher than the expected return for investment B. B) the actual return for investment A will be […]
All of the following securities are sold in money markets EXCEPT A) commercial paper. B) 3-month U.S. Treasury bills. C) 6-month certificates of deposit. D) common stock. ANSWER D
Common-sized income statements A) compare companies with the same level of net income. B) compare companies with the same level of total sales. C) assist in the comparison of companies of different sizes. D) show each income statement account as a percentage of total assets. ANSWER C
Corporation A decides to borrow $1,000,000 and use the money to buy back $1,000,000 of its common stock. The corporation pays 6% interest on its borrowed funds which exactly equals the amount of the dividend it used to pay on the common stock it repurchased. Therefore, A) Corporation A’s net income will increase due to […]
If you only earned interest on your initial investment, and not on previously earned interest, it would be called simple interest. Indicate whether the statement is true or false ANSWER TRUE
Which of the following is an advantage of organized stock exchanges? A) providing a continuous market B) screening companies to ensure only low risk stocks are sold C) increased stock price volatility D) Only profitable companies may issue new securities on an organized exchange. ANSWER A
The principle of risk-return trade-off means that A) higher risk investments must earn higher returns. B) an investor who takes more risk will earn a higher return. C) an investor who bought stock in a small corporation five years ago has more money than an investor who bought U.S. Treasury bonds five years ago. D) […]
A rational investor would prefer to receive $1,200 today rather than $100 per month for 12 months. Indicate whether the statement is true or false ANSWER TRUE
In an ideal world, which of the following would be used to evaluate firm performance? A) accounting assets and profits B) book value of assets C) market value of assets D) corporate retained earnings from the day of incorporation ANSWER C
General Motors raises money by selling a new issue of common stock. This transaction occurs in A) the futures market. B) the capital market. C) the money market. D) the secondary market. ANSWER B
