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strayer fin534 quiz 5

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Question;Question 1;2 out of 2 points;GCC Corporation is planning to issue options to its key;employees, and it is now discussing the terms to be set on those options. Which of the following actions would decrease;the value of the options, other things held constant?;Answer;Selected Answer;Question 2;2 out of 2 points;Other things held constant, the value of an option depends;on the stock's price, the risk-free rate, and the;Answer;Question 3;2 out of 2 points;Which of the following statements is CORRECT?;Answer;Selected Answer;Question 4;2 out of 2 points;Deeble Construction Co.?s stock is trading at $30 a;share. Call options on the company?s;stock are also available, some with a strike price of $25 and some with a;strike price of $35. Both options expire;in three months. Which of the following;best describes the value of these options?;Answer;Question 5;2 out of 2 points;The current price of a stock is $50, the annual risk-free;rate is 6%, and a 1- year call option with a strike price of $55 sells for;$7.20. What is the value of a put;option, assuming the same strike price and expiration date as for the call;option?;Answer;Question 6;2 out of 2 points;Warner Motors? stock is trading at $20 a share. Call options that expire in three months with;a strike price of $20 sell for $1.50.;Which of the following will occur if the stock price increases 10%, to;$22 a share?;Answer;Question 7;2 out of 2 points;Which of the following statements is CORRECT?;Answer;Question 8;2 out of 2 points;An option that gives the holder the right to sell a stock at;a specified price at some future time is;Answer.;Question 9;2 out of 2 points;Which of the following statements is CORRECT?;Answer;Question 10;2 out of 2 points;Which of the following statements is CORRECT?;Answer;Question 11;2 out of 2 points;Call options on XYZ Corporation?s common stock trade in the;market. Which of the following;statements is most correct, holding other things constant?;Answer;Question 12;2 out of 2 points;Which of the following statements is CORRECT?;Answer;Question 13;2 out of 2 points;Suppose you believe that Johnson Company's stock price is;going to increase from its current level of $22.50 sometime during the next 5;months. For $310.25 you can buy a;5-month call option giving you the right to buy 100 shares at a price of $25;per share. If you buy this option for;$310.25 and Johnson's stock price actually rises to $45, what would your;pre-tax net profit be?;Answer;Question 14;2 out of 2 points;Suppose you believe that Delva Corporation's stock price is;going to decline from its current level of $82.50 sometime during the next 5;months. For $510.25 you could buy a;5-month put option giving you the right to sell 100 shares at a price of $85;per share. If you bought this option for;$510.25 and Delva's stock price actually dropped to $60, what would your;pre-tax net profit be?;Answer;Question 15;2 out of 2 points;The current price of a stock is $22, and at the end of one;year its price will be either $27 or $17.;The annual risk-free rate is 6.0%, based on daily compounding. A 1-year call option on the stock, with an;exercise price of $22, is available.;Based on the binominal model, what is the option's value?;Answer;Question 16;2 out of 2 points;Which of the following statements is CORRECT?;Answer;Question 17;2 out of 2 points;Firm M's earnings and stock price tend to move up and down;with other firms in the S&P 500, while Firm W's earnings and stock price;move counter cyclically with M and other S&P companies. Both M and W estimate their costs of equity;using the CAPM, they have identical market values, their standard deviations of;returns are identical, and they both finance only with;common equity. Which;of the following statements is CORRECT?;Answer;Question 18;2 out of 2 points;Safeco Company and Risco Inc are identical in size and;capital structure. However, the;riskiness of their assets and cash flows are somewhat different, resulting in;Safeco having a WACC of 10% and Risco a WACC of 12%. Safeco is considering Project X, which has an;IRR of 10.5% and is of the same risk as a typical Safeco project. Risco is considering Project Y, which has an;IRR of 11.5% and is of the same risk as a typical Risco project. Now assume that;the two companies merge and form a new company, Safeco/Risco Inc. Moreover, the new company's market risk is an;average of the pre-merger companies' market risks, and the merger has no impact;on either the cash flows or the risks of Projects X and Y. Which of the following statements is CORRECT?;Answer;Question 19;2 out of 2 points;If a typical U.S. company correctly estimates its WACC at a;given point in time and then uses that same cost of capital to evaluate all;projects for the next 10 years, then the firm will most likely;Answer;Question 20;2 out of 2 points;Which of the following statements is CORRECT?;Answer;Question 21;2 out of 2 points;Which of the following statements is CORRECT?;Answer;Question 22;2 out of 2 points;Which of the following statements is CORRECT?;Answer;Question 23;2 out of 2 points;Which of the following is NOT a capital component when;calculating the weighted average cost of capital (WACC) for use in capital;budgeting?;Answer;Question 24;2 out of 2 points;Duval Inc. uses only equity capital, and it has two;equally-sized divisions. Division A?s;cost of capital is 10.0%, Division B?s cost is 14.0%, and the corporate;(composite) WACC is 12.0%. All of;Division A?s projects are equally risky, as are all of Division B's;projects. However, the projects of;Division A are less risky than those of Division B. Which of the following projects should the;firm accept?;Answer;Question 25;2 out of 2 points;Which of the following statements is CORRECT?;Answer;Question 26;2 out of 2 points;For a typical firm, which of the following sequences is;CORRECT? All rates are after taxes, and;assume that the firm operates at its target capital structure.;Answer;Question 27;2 out of 2 points;Which of the following statements is CORRECT?;Answer.;Question 28;2 out of 2 points;Which of the following statements is CORRECT?;Answer;Question 29;2 out of 2 points;Which of the following statements is CORRECT?;Answer;Question 30;2 out of 2 points;Which of the following statements is CORRECT?;Answer

 

Paper#49857 | Written in 18-Jul-2015

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