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Multiple Choice Questions of Finance




Question;1. (TCO 1) Which of the following is true about fixed-income securities? (Points: 6)You will always find some on the right side of the balance sheet.Could be found on the right side of the balance sheetOccasionally show up on the left side of the balance sheetNone of the above(Fixed Income Securities if issued are shown on right side and when purchased as Securities shown on left side, so guessing point 2 to be correct)2. (TCO 2) The concept of risk versus return _______. (Points: 6)is all about investors' expectation of higher risk deserving higher returnsmeans that most investors require 2 times the change in return for a given change in riskrefers to most of us being risk-lovingNone of the above3. (TCO 5) Which of the following is true? (Points: 6)YTM is the same as a bond's COUPON yield in all cases.YTM reflects the total return to a bondholder, taking time value of MONEY into account.Yield to call is of interest to companies issuing redeemable bonds only.None of the above4. (TCO 9) FINANCIAL leverage _______. (Points: 6)is affected by numerous factors including how much debt versus equity there is in the firmis primarily affected by sales levelsis never good if it's too highNone of the aboveQuestion 5. 5. (TCO 9) Which of the following is true about a firm's WACC? (Points: 6)WACC is only important when a firm needs to calculate its taxes.WACC is important as it represents the percentage of debt versus equity.WACC is important as it is the discount rate used in capital budgeting analysis.None of the aboveQuestion 6. 6. (TCO 7) A firm's optimal capital structure occurs when ______. (Points: 6)WACC = 1financial leverage = 1tax rate is minimizedNone of the aboveQuestion 7. 7. (TCO 3) Which of the following is not true about corporate bonds? (Points: 6)Once sold in the initial offering, they are rarely sold again in the open market.Bond offerings are overseen by the SEC just like stock IPOs.The shelf registration process is sometimes used.None of the aboveQuestion 8. 8. (TCO 9) What is the concept behind M&M Principle 1 in a world of no taxes? (Points: 6)The higher the corporate tax rate, the higher the firm value.If there are no taxes, the value of the firm is unaffected by capital structure.Capital structure is primarily determined by a firm's WACC.None of the aboveQuestion 9. 9. (TCO 6) Which is true about the normal yield curve? (Points: 6)It's rarely a straight, horizontal line.Its primary component is liquidity risk.Its primary component is inflation premium.None of the aboveQuestion 10. 10. (TCO 4) Which of the following would give a good picture of the bond market? (Points: 6)Dow Jones Industrial IndexS&P 500NasdaqNone of the aboveQuestion 11. 11. (TCO 8) Who would not normally be concerned about creating an investment policy for portfolio creation? (Points: 6)CEO of a firm issuing bonds401k plan managerPension fund managerNone of the aboveQuestion 12. 12. (TCOs 1, 8) What kind of securities would investors seeking a steady income probably look to? (Points: 6)Common stock, Treasury bills, and corporate bondsPreferred stock, Treasury bonds, and corporate bondsCorporate bonds rated "bbb" onlyNone of the above13. (TCO 6) Portfolio diversification attempts to ______. (Points: 6)maximize the investor's returnminimize risk per unit of returnminimize the riskNone of the above14. (TCO 5) What does the term structure of interest rates refer to? (Points: 6)The fact that long-term interest rates are always higher than short-term interest ratesThe relationship between bond maturities and interest ratesWhy the expectations theory and liquidity preference theory are contradictory


Paper#48943 | Written in 18-Jul-2015

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