well-respected chairman of the Federal Reserve Bank suddenly resigns
July 11, 2019
Explain the factors that affect health promotion and disease prevention for a vulnerable or diverse population.
July 11, 2019

well-respected chairman of the Federal Reserve Bank suddenly resigns

FIN 571 Final Exam August 2017

1

Which one of the following is an example of a nondiversifiable risk?​

Correct Answer

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​A well-respected chairman of the Federal Reserve Bank suddenly resigns

Correct Answer

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​A poorly managed firm suddenly goes out of business due to lack of sales

Correct Answer

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​A well-respected president of a firm suddenly resigns

Correct Answer

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​A key employee suddenly resigns and accepts employment with a key competitor

Correct Answer

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​A well-managed firm reduces its work force and automates several jobs

question2

A firm has a debt-equity ratio of .64, a pretax cost of debt of 8.5 percent, and a required return on assets of 12.6 percent. What is the cost of equity if you ignore taxes?​

Correct Answer

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​15.22%

Correct Answer

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​16.38%

Correct Answer

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​8.06%

Correct Answer

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​11.12%

Correct Answer

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​8.55%

question3

Which term defines the tax rate that applies to the next dollar of taxable income earned?​

Correct Answer

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​Deductible

Correct Answer

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​Marginal

Correct Answer

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​Average

Correct Answer

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​Total

Correct Answer

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​Residual

question4

All else held constant, interest rate risk will increase when the time to maturity:​

Correct Answer

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​Increases or the coupon rate decreases.

Correct Answer

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​Decreases or the coupon rate increases.

Correct Answer

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​Increases or the coupon rate increases.

Correct Answer

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​Decreases or the coupon rate decreases.

Correct Answer

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​Decreases and the coupon rate equals zero.

question5

Under the _______ method, the underwriter buys the securities for less than the offering price and accepts the risk of not selling the issue, while under the _______ method, the underwriter does not purchase the shares but merely acts as an agent.​

Correct Answer

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​Negotiated offer; competitive offer

Correct Answer

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​Firm commitment; best efforts

Correct Answer

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​Competitive offer; negotiated offer

Correct Answer

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​Best efforts; firm commitment

Correct Answer

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​Seasoned; unseasoned 

question6

The underlying assumption of the dividend growth model is that a stock is worth:​

Correct Answer

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​An amount computed as the next annual dividend divided by the market rate of return.

Correct Answer

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​The present value of the future income that the stock is expected to generate.

Correct Answer

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​The same amount to every investor regardless of their desired rate of return.

Correct Answer

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​The same amount as any other stock that pays the same current dividend and has the same required rate of return.

Correct Answer

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​An amount computed as the next annual dividend divided by the required rate of return.

question7

The excess return you earn by moving from a relatively risk-free investment to a risky investment is called the:​

Correct Answer

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​Inflation premium.

Correct Answer

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​Risk premium.

Correct Answer

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​Arithmetic average return.

Correct Answer

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​Time premium.

Correct Answer

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​Geometric average return.

question8

Which one of these statements is correct concerning the cash cycle?​

Correct Answer

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​A positive cash cycle is preferable to a negative cash cycle.

Correct Answer

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​Increasing the accounts payable period increases the cash cycle.

Correct Answer

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​The longer the cash cycle, the more likely a firm will need external financing.

Correct Answer

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​The cash cycle can exceed the operating cycle if the payables period is equal to zero.

Correct Answer

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​Adopting a more liberal accounts receivable policy will tend to decrease the cash cycle.

question9

​Which one of the following statements about preferred stock is true?

Correct Answer

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​If preferred dividends are non-cumulative, then preferred dividends not paid in a particular year will be carried forward to the next year.

Correct Answer

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​Preferred stock usually has a stated liquidating value of $100 per share.

Correct Answer

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​Unlike dividends paid on common stock, dividends paid on preferred stock are a tax-deductible expense.

Correct Answer

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​There is no significant difference in the voting rights granted to preferred and common shareholders.

Correct Answer

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​Dividends on preferred stock payable during the next twelve months are considered to be a corporate liability.

question10

​What is the present value of $6,811 to be received in one year if the discount rate is 6.5 percent?

Correct Answer

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​$6,023.58

Correct Answer

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​$6,671.13

Correct Answer

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​$6,395.31

Correct Answer

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​$6,643.29

Correct Answer

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​$7,253.72

question11

The market price of a bond increases when the:​

Correct Answer

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​Coupon rate decreases.

Correct Answer

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​Par value decreases.

Correct Answer

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​Face value decreases.

Correct Answer

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​Discount rate decreases.

Correct Answer

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​Coupon is paid annually rather than semiannually.

question12

​The process of planning and managing a firm’s long-term assets is called:

Correct Answer

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​Capital structure.

Correct Answer

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​Financial depreciation.

Correct Answer

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​Working capital management.

Correct Answer

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​Agency cost analysis.

Correct Answer

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​Capital budgeting.

question13

The discount rate that makes the net present value of an investment exactly equal to zero is called the:​

Correct Answer

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​Profitability index.

Correct Answer

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​Average accounting return.

Correct Answer

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​External rate of return.

Correct Answer

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​Internal rate of return.

Correct Answer

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​Equalizer.

question14

The cash flow resulting from a firm’s ongoing, normal business activities is referred to as the:​

Correct Answer

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​Cash flow to investors.

Correct Answer

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​Operating cash flow.

Correct Answer

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​Additions to net working capital.

Correct Answer

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​Cash flow to retained earnings.

Correct Answer

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​Net capital spending.

question15

Lois is purchasing an annuity that will pay $5,000 annually for 20 years, with the first annuity payment made on the date of purchase. What is the value of the annuity on the purchase date given a discount rate of 7 percent?​

Correct Answer

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​$66,916.21

Correct Answer

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​$54,282.98

Correct Answer

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​$56,191.91

Correct Answer

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​$52,970.07

Correct Answer

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​$56,677.98

question16

Which one of the following statements is false?​

Correct Answer

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​An aging schedule includes only overdue accounts.

Correct Answer

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​Investments in accounts receivable equal average daily sales times average collection period.

Correct Answer

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​Collection efforts may involve legal action.

Correct Answer

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​Aging schedules are used to monitor accounts receivable.

Correct Answer

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​If sales are seasonal, the percentages shown on an aging schedule will vary during the year.

question17

The primary goal of financial management is to:​

Correct Answer

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​Minimize operational costs and maximize firm efficiency.

Correct Answer

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​Maximize current dividends per share of the existing stock.

Correct Answer

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​Avoid financial distress.

Correct Answer

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​Maximize the current value per share of the existing stock.

Correct Answer

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​Maintain steady growth in both sales and net earnings.

question18

A project has an initial cost of $2,250. The cash inflows are $0, $500, $900, and $700 for Years 1 to 4, respectively. What is the payback period?​

Correct Answer

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​3.92 years

Correct Answer

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​2.97 years

Correct Answer

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​2.84 years

Correct Answer

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​3.98 years

Correct Answer

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​never

question19

Futures contracts contrast with forward contracts by:​

Correct Answer

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​Marking to the market on a weekly basis.

Correct Answer

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​Providing an option for the buyer rather than an obligation.

Correct Answer

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​Allowing the parties to negotiate the contract size.

Correct Answer

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​Requiring contract fulfillment by the two originating parties.

Correct Answer

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​Allowing the seller to deliver any day during the delivery month.

question20

All else equal, the contribution margin must increase as:​

Correct Answer

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​The variable cost per unit declines.

Correct Answer

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​The sales price minus the fixed cost per unit increases.

Correct Answer

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​Sales price per unit declines.

Correct Answer

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​The fixed cost per unit declines.

Correct Answer

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​Both the sales price and variable cost per unit increase.

question21

Ratios that measure a firm’s ability to pay its bills over the short run without undue stress are known as:​

Correct Answer

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​Market value ratios.

Correct Answer

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​Asset management ratios.

Correct Answer

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​Liquidity measures.

Correct Answer

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​Profitability ratios.

Correct Answer

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​Long-term solvency measures.

question22

The costs of avoiding a bankruptcy filing by a financially distressed firm are classified as _____ costs.

Correct Answer

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​Flotation

Correct Answer

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​Capital structure

Correct Answer

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​Financial solvency

Correct Answer

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​Direct bankruptcy

Correct Answer

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​Indirect bankruptcy

question23

An interest rate that is compounded monthly, but is expressed as if the rate were compounded annually, is called the _____ rate.​

Correct Answer

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​Daily interest

Correct Answer

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​Compound interest

Correct Answer

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​Effective annual

Correct Answer

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​Periodic interest

Correct Answer

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​Stated interest

question24

The higher the inventory turnover, the:​

Correct Answer

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​Lesser the amount of inventory held by a firm.

Correct Answer

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​Longer it takes a firm to sell its inventory.

Correct Answer

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​Higher the inventory as a percentage of total assets.

Correct Answer

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​Greater the amount of inventory held by a firm.

Correct Answer

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​Less time inventory items remain on the shelf.

question25

You plan to invest $6,500 for three years at 4 percent simple interest. What will your investment be worth at the end of the three years?​

Correct Answer

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​$6,760.00

Correct Answer

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​$6,941.11

Correct Answer

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​$7,311.62

Correct Answer

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​$7,250.00

Correct Answer

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​$7,280.00

question26

​Which one of these is a correct definition? 

Correct Answer

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​Tangible assets are fixed assets such as patents.

Correct Answer

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​Net working capital equals current assets plus current liabilities.

Correct Answer

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​Current assets are assets with short lives, such as inventory.

Correct Answer

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​Current liabilities are debts that must be repaid in 18 months or less.

Correct Answer

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​Long-term debt is defined as a residual claim on a firm’s assets.

question27

One disadvantage of the corporate form of business ownership is the:​

Correct Answer

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​Double taxation of profits.

Correct Answer

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​Difficulties encountered when changing ownership.

Correct Answer

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​Firms ability to raise cash.

Correct Answer

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​Limited liability protection provided for all owners.

Correct Answer

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​Unlimited life of the firm.

question28

​A firm has a total debt ratio of .47. This means the firm has 47 cents in debt for every:

Correct Answer

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​$1 in current assets.

Correct Answer

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​$1 in fixed assets.

Correct Answer

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​$.53 in total equity.

Correct Answer

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​$.53 in total assets.

Correct Answer

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​$1 in total equity.

question29

Book value:​

Correct Answer

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​Generally tends to exceed market value when fixed assets are included.

Correct Answer

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​Is based on historical cost.

Correct Answer

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​Is more of a financial than an accounting valuation.

Correct Answer

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​Is equivalent to market value for firms with fixed assets.

Correct Answer

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​Is adjusted to market value whenever the market value exceeds the stated book value.

question30

An efficient capital market is one in which:​

Correct Answer

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​All investments earn the market rate of return.

Correct Answer

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​Securities always offer a positive NPV.

Correct Answer

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​Security prices reflect all available information.

Correct Answer

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​Taxes are irrelevant.

Correct Answer

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​Brokerage commissions are zero.


well-respected chairman of the Federal Reserve Bank suddenly resigns was first posted on July 11, 2019 at 5:21 am.
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