Finance Questions - 4007 Words

1. Market risk is the chance that a totally unexpected event will have a significant effect on the value of the firm or a specific investment. Answer: FALSE 2. Purchasing-power risk is the chance that changes in interest rates will adversely affect the value of an investment; most investments decline in value when the interest rates rise and increase in value when interest rates fall. Answer: FALSE 3. If a persons required return does not change when risk increases, that person is said to be A) risk-seeking. B) risk-indifferent. C) risk-averse. D) risk-aware. 4. If a persons required return decreases for an increase in risk, that person is said to be A) risk-seeking. B)†¦show more content†¦Answer: TRUE 28. The empirical measurement of beta can be approached by using least-squares regression analysis to find the regression coefficient (bj) in the equation for the slope of the characteristic line. Answer: TRUE 29. Nico owns 100 shares of stock X which has a price of $12 per share and 200 shares of stock Y which has a price of $3 per share. What is the proportion of Nicos portfolio invested in stock X? A) 77% B) 67% C) 50% D) 33% 30. Nico wants to invest all of his money in just two assets: the risk free asset and the market portfolio. What is Nicos portfolio beta if he invests a quarter of his money in the market portfolio and the rest in the risk free asset? A) 0.00 B) 0.25 C) 0.75 D) 1.00 31. What is the expected market return if the expected return on asset X is 20 percent, its beta is 1.5, and the risk free rate is 5 percent? A) 5.0% B) 7.5% C) 15.0% D) 22.5% 32. The term structure of interest rates is the graphical presentation of the relationship between the annual rate of interest earned on a security purchased on a given day and held to maturity and the remaining time to maturity. Answer: FALSE 33. An inverted yield curve is a downward-sloping yield curve that indicates generally cheaper long-term borrowing costs than short-term borrowing costs. Answer: TRUE 34. A yield curve that reflects relatively similar borrowing costs for bothShow MoreRelatedFinance Questions723 Words   |  3 Pages Provide detailed descriptions and show all calculations used to arrive at solutions for the following questions: 1. Community Hospital has annual net patient revenues of $150 million. At the present time, payments received by the hospital are not deposited for six days on average. The hospital is exploring a lockbox arrangement that promises to cut the six days to one day. If these funds released by the lockbox arrangement can be invested at 8 percent, what will the annual savings be? Assume theRead MoreQuestions on Finance2789 Words   |  12 Pagesï » ¿FIN 301 HW Chapter 1 (Odds 1-17) 1. Define shareholder wealth. Explain how it is measured Shareholder wealth is represented by the market price of a firm’s common stock. It is measured by the market value of the shareholders’ common stock holdings 2. Which type of corporation is more likely to be a shareholder wealth maximizer -one with wide ownership and no owners directly involved in the firms management or one that is closely held. A closely held corporation 3. It has been argued that shareholderRead MoreAccounting Finance Questions1228 Words   |  5 PagesQuestion 1 Listing on a stock exchange might be highly desirable for a company, but there are a number of requirements, conditions and costs associated with becoming a publicly listed corporation. a) Discuss the ASX profit test and asset test requirements. b) Analyse the advantages and costs that are incurred when a company becomes a publicly listed corporation. a) To meet the profit test requirements of admission, an entity must satisfy each of the following conditions: * The entityRead MoreFinance and Question Essay1396 Words   |  6 PagesQuestion 1 (5 points) In a world with no frictions (i.e., taxes, etc.), having debt is always better because it increases the value of the firm/project. Your Answer Score Explanation True. False. Correct 5.00 Correct. You understand the irrelevance of financing. Total 5.00 / 5.00 Question Explanation Fundamental question about value creation. Question 2 (5 points) The return of equity is equal to the return on debt of a project/firm Your Answer Score Explanation SometimesRead MoreQuestions On Sources Of Finance1696 Words   |  7 PagesIn this assignment, four different sources of finance preferably two short term and two long term sources of funding will be discussed and identified. Secondly, it will also talk about and select to non-financial companies listed on the London Stock Exchange and will find their most current financial statements based on the last 5 years. I have selected Tesco and Sainsbury’s as my two non financial companies. Thirdly, I will then define and converse the pros and cons of each source of funding andRead MoreBusiness Finance: Questions1612 Words   |  7 Pagesï » ¿Question 1 Reliable Gearing currently is all-equity financed. It has 10,000 shares of equity outstanding, selling at $100 a share. The firm is considering a capital restructuring. The low-debt plan calls for a debt issue of $200,000 with the proceeds used to buy back stock. The high debt plan would exchange $400,000 of debt for equity. The debt will pay an interest rate of 10%. The firm pays no taxes. a. What will be the debt-to-equity ratio after each possible restructuring? b. If earningsRead MoreCorporate Finance - Concept Questions12247 Words   |  49 PagesCONCEPT QUESTIONS - CHAPTER 1 1.1 ( What are the three basic questions of corporate finance? a. Investment decision (capital budgeting): What long-term investment strategy should a firm adopt? b. Financing decision (capital structure): How much cash must be raised for the required investments? c. Short-term finance decision (working capital): How much short-term cash flow does company need to pay its bills. ( Describe capital structure. Capital structureRead MoreQuestions On Finance Lease And Operating Lease Essay894 Words   |  4 PagesQuestion a It can be found from the IAS 17; the lease is defined that â€Å"A lease is an arrangement whereby the lessor coveys to the lessee in return for a payment or series of payments the right to use an asset for an agreed period of time†. (IAS 17, 2003). There are two types of lease: finance lease and operating lease. The following parts will identify them separately and accounting treatments will be discussed in lessees’ and lessors’ aspect. Firstly, it is the finance lease and it is a lease thatRead MoreFinal Question Paper: Corporate Finance24063 Words   |  97 Pages80 | 1.53 | $44.06 | Wal-Mart | $47.90 | 4.17 | $199.74 | Intel | $19.60 | 5.77 | $113.09 | Boeing | $75.00 | 0.79 | $59.25 | | | Total | $416.15 | | ------------------------------------------------- Use the table for the question(s) below. Consider the following three individuals portfolios consisting of investments in four stocks: Stock | Beta | Peter s Investment | Paul s Investment | Mary s Investment | Eenie | 1.3 | 2500 | 5000 | 10000 | Meenie | 1.0 | 2500Read MoreIssues in Applied Finance Financial Planning Assignment: Questions Answers1104 Words   |  5 PagesAFIN310 Issues in Applied Finance Financial Planning Assignment: Questions Answers General Questions 1. Is an introduction / executive summary and conclusion required? No. You are to answer each question and keep to a total maximum of 15 pages, excluding cover page. No marks will be provided for anything written on page 16 or beyond. Students are recommended to refer to the mark allocation when answering each question. 2. Is specific formatting required? Eg The font you can use is Calibri, size