Financial Planning Exam Review
Course Introduction
Financial Planning is a comprehensive course designed to introduce students to the principles and practices of managing personal and organizational finances. The course covers essential topics such as budgeting, saving, investing, tax planning, risk management, retirement strategies, and estate planning. Emphasis is placed on developing practical skills to create effective financial plans that align with individual and business goals. Through case studies and real-world scenarios, students will learn to analyze financial situations, assess investment options, and make informed decisions to achieve long-term financial stability and growth.
Recommended Textbook
Corporate Finance 3rd Canadian Edition by Jonathan Berk
Available Study Resources on Quizplus
31 Chapters
2210 Verified Questions
2210 Flashcards
Source URL: https://quizplus.com/study-set/3330
Page 2
Chapter 1: The Corporation
Available Study Resources on Quizplus for this Chatper
42 Verified Questions
42 Flashcards
Source URL: https://quizplus.com/quiz/66136
Sample Questions
Q1) Which of the following statements regarding limited partnerships is true?
A) There is no limit on a limited partner's liability.
B) A limited partner's liability is limited by the amount of his investment.
C) A limited partner is not liable until all of the assets of the general partners have been exhausted.
D) A general partner's liability is limited by the amount of his investment.
Answer: B
Q2) How much would you have to pay to purchase 100 shares of XYZ stock on November 18th?
A) $2,520
B) $2,525
C) $2,593
D) $2,600
Answer: D
Q3) Stocks trading in a large electronic exchange such as the TSX will normally
A) experience a narrow bid-ask range.
B) experience a wide bid-ask range.
C) be thinly traded.
D) incur high transaction costs.
Answer: A
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: Introduction to Financial Statement Analysis
Available Study Resources on Quizplus for this Chatper
74 Verified Questions
74 Flashcards
Source URL: https://quizplus.com/quiz/66137
Sample Questions
Q1) Which of the following balance sheet equations is incorrect?
A) Assets - Liabilities = Shareholders' Equity
B) Assets = Liabilities + Shareholders' Equity
C) Assets - Current Liabilities = Long Term Liabilities
D) Assets - Current Liabilities = Long Term Liabilities + Shareholders' Equity
Answer: C
Q2) P/B ratio is ________.
A) price-to-book ratio
B) profit-to-book ratio
C) property-to-book ratio
D) price-to-benefit ratio
Answer: A
Q3) DuPont Identity expresses the ROE in terms of the firm's ________.
A) profitability, asset efficiency, and leverage
B) current assets, current liabilities, long-term debts
C) profitability, interest expense, and net income
D) total assets, total liabilities, and total equity
Answer: A
To view all questions and flashcards with answers, click on the resource link above.
4
Chapter 3: Arbitrage and Financial Decision Making
Available Study Resources on Quizplus for this Chatper
79 Verified Questions
79 Flashcards
Source URL: https://quizplus.com/quiz/66138
Sample Questions
Q1) A McDonald's Big Mac value meal consists of a Big Mac Sandwich,Large Coke,and a Large Fry.Assuming that there is a competitive market for McDonald's food items,at what price must a Big Mac value meal sell to insure the absence of an arbitrage opportunity and uphold the law of one price?
A) $4.08
B) $4.38
C) $5.47
D) $5.77
Answer: C
Q2) Consider an ETF that is made up of one share each of IBM,MRK,and C. The current quote for this ETF currently is $168.15 (bid)$168.20 (ask).What should you do?
Answer: There is an arbitrage opportunity.Sell the ETF at the bid of $168.15 and buy the underlying securities at the ask prices.So we have + 168.15 - 79.50 - 40.05 - 48.55 = .05 arbitrage profit per share.
Q3) In a normal market with transactions costs,is it possible for different investors to place different values on an investment opportunity? Are there any limits on the amount that their values can differ?
Answer: Values can differ,but only up to the total amount of transactions costs.
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: The Time Value of Money
Available Study Resources on Quizplus for this Chatper
84 Verified Questions
84 Flashcards
Source URL: https://quizplus.com/quiz/66139
Sample Questions
Q1) Suppose that a young couple has just had their first baby and they wish to insure that enough money will be available to pay for their child's university education.They decide to make deposits into an educational savings account on each of their child's birthdays,starting with the first birthday.Assume that the educational savings account will return a constant 7%.The parents deposit $2,000 on their child's first birthday and plan to increase the size of their deposits by 5% each year.Draw a timeline that details the amounts that will be deposited into the account up to and including their child's 18th birthday.
Q2) It has long been told that the Dutch purchased Manhattan island in 1,626 for the value of 60 guilders ($24).Assuming that the Dutch invested this money into an account earning 5%,approximately how much would their investment be worth 380 years later in 2006?
A) $2.7 billion
B) $3.1 billion
C) $4.5 billion
D) $1.9 trillion
Q3) Draw a timeline detailing the cash flows from investment "B."
Q4) Draw a timeline detailing the cash flows from investment "A."
Q5) The future value at retirement (age 65)of your savings is:
Q6) Draw a timeline detailing Joe's cash flows from the sale of the family business.
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: Interest Rates
Available Study Resources on Quizplus for this Chatper
69 Verified Questions
69 Flashcards
Source URL: https://quizplus.com/quiz/66140
Sample Questions
Q1) You are considering purchasing a new automobile that will cost you $28,000.The dealer offers you 4.9% APR financing for 60 months (with payments made at the end of the month).Assuming you finance the entire $28,000 and finance through the dealer,your monthly payments will be closest to:
A) $1,454
B) $527
C) $467
D) $478
Q2) If the current inflation rate is 4% and you have an investment opportunity that pays 10%,then the real rate of interest on your investment is closest to:
A) 10.0%
B) 14.0%
C) 6.0%
D) 5.8%
Q3) Assuming that you have made all of the first 24 payments on time,how much interest have you paid over the first two years of your loan?
Q4) Can the nominal interest rate ever be negative? Can the real interest rate ever be negative? Explain.
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: Valuing Bonds
Available Study Resources on Quizplus for this Chatper
104 Verified Questions
104 Flashcards
Source URL: https://quizplus.com/quiz/66141
Sample Questions
Q1) Assuming that this bond trades for $903,then the YTM for this bond is closest to:
A) 8.0%
B) 6.8%
C) 9.9%
D) 9.2%
Q2) Suppose that when these bonds were issued,Luther received a price of $972.42 for each bond.What is the likely rating that Luther's bonds received?
A) AA
B) BBB
C) B
D) A
Q3) If a bond is currently trading at its face (par)value,then it must be the case that
A) the bond's yield to maturity is less than its coupon rate.
B) the bond's yield to maturity is equal to its coupon rate.
C) the bond's yield to maturity is greater than its coupon rate.
D) the bond is a zero-coupon bond.
Q4) Plot the zero-coupon yield curve (for the first five years).
Q5) Compute the yield to maturity for each of the five zero-coupon bonds.
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Valuing Stocks
Available Study Resources on Quizplus for this Chatper
88 Verified Questions
88 Flashcards
Source URL: https://quizplus.com/quiz/66142
Sample Questions
Q1) Because of a catastrophic plane crash,the FAA announced that it is withdrawing its air worthiness certification for Fly by Night Aviation's (FBNA)new four seat private plane.As a result FBNA's future expected free cash flows will decline by $40 million a year for the next eight years.FBNA has 20 million shares outstanding,no debt,and an equity cost of capital of 12%.If this news is a complete surprise to investors,then the amount that FBNA's stock price should fall upon the announcement is closest to:
A) $2.00
B) $16.00
C) $16.70
D) $9.90
Q2) The forward price-earning ratio is based on
A) the expected earnings over the coming 12 months and predicted share price in the next 12 months.
B) the earnings in the previous 12 months and predicted share price in the next 12 months.
C) the expected earnings over the coming 12 months and current share price.
D) the previous earnings in the past 12 months and the current share price.
Q3) What are some common multiples used to value stocks?
Q4) Calculate the enterprise value for DM Corporation.
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Investment Decision Rules
Available Study Resources on Quizplus for this Chatper
83 Verified Questions
83 Flashcards
Source URL: https://quizplus.com/quiz/66143
Sample Questions
Q1) The payback period for project B is closest to:
A) 2.5 years
B) 2.0 years
C) 2.2 years
D) 2.4 years
Q2) The investment rule with the Internal Rate of Return states:
A) Take any investment opportunity whose IRR is less than the opportunity cost of capital. Turn down any opportunity whose IRR exceeds the opportunity cost of capital.
B) Forego any investment opportunity whose IRR exceeds the opportunity cost of capital. Take any opportunity whose IRR is less than the opportunity cost of capital.
C) Take any investment opportunity whose IRR exceeds the opportunity cost of capital. Turn down any opportunity whose IRR is less than the opportunity cost of capital.
D) None of the above
Q3) Explain why the NPV decision rule might provide Larry with a different decision outcome than the IRR rule when evaluating Larry's three movie deal offer.
Q4) If the discount rate for project B is 15%,then what is the NPV for project B?
To view all questions and flashcards with answers, click on the resource link above.
Page 10
Chapter 9: Fundamentals of Capital Budgeting
Available Study Resources on Quizplus for this Chatper
94 Verified Questions
94 Flashcards
Source URL: https://quizplus.com/quiz/66144
Sample Questions
Q1) Which of the following statements is false?
A) Net Working Capital = Current Assets - Current Liabilities.
B) Because depreciation is not a cash flow, we do not include it in the cash flow forecast.
C) Tax loss carrybacks allow corporations to take losses during the current year and use them to offset income in future years.
D) Earnings are an accounting measure of firm performance.
Q2) To calculate the Capital Cost Allowance (CCA),Canadian firms must determine the A) variable asset class.
B) operating asset class.
C) capital asset class.
D) none of the above.
Q3) Break-even analysis determines the level of a parameter that makes the project's NPV equal to
A) a positive number.
B) zero.
C) a negative number.
D) none of the above.
Q4) How does scenario analysis differ from sensitivity analysis?
Q5) What is sensitivity analysis?
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter 10: Capital Markets and the Pricing of Risk
Available Study Resources on Quizplus for this Chatper
98 Verified Questions
98 Flashcards
Source URL: https://quizplus.com/quiz/66145
Sample Questions
Q1) The standard deviation of the returns on the S&P 500 from 1996 to 2005 is closest to:
A) 19.5%
B) 20.5%
C) 3.8%
D) 8.8%
Q2) What is the beta for a type S firm?
A) 1.5
B) 0.0
C) 1.0
D) 0.75
Q3) The standard deviation of the return on Alpha Corporation is closest to:
A) 22.4%
B) 19.0%
C) 21.8%
D) 19.4%
Q4) Suppose that you want to use the 10 year historical average return on Microsoft to forecast the expected future return on Microsoft.Calculate the 95% confidence interval for your estimate of the expect return.
Q5) What is the difference between common risk and independent risk?
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: Optimal Portfolio Choice and the Capital Asset
Pricing Model
Available Study Resources on Quizplus for this Chatper
108 Verified Questions
108 Flashcards
Source URL: https://quizplus.com/quiz/66146
Sample Questions
Q1) The volatility of a portfolio that is equally invested in Duke Energy and Microsoft is closest to:
A) 8%
B) 9%
C) 11%
D) 6%
Q2) The amount of risk that will remain in a portfolio depends on the degree to which the stocks are exposed to
A) independent risks.
B) diversifiable risks.
C) common risks.
D) idiosyncratic risks.
Q3) Assuming that the EFT you invested in returns -10%,then the realized return on your investment is closest to:
A) -20%
B) -10%
C) -24%
D) -26%
Q4) Calculate the correlation between Home Depot's and IBM's returns.
Q5) What are three main assumptions underlie the CAPM?
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: Estimating the Cost of Capital
Available Study Resources on Quizplus for this Chatper
108 Verified Questions
108 Flashcards
Source URL: https://quizplus.com/quiz/66147
Sample Questions
Q1) Important choices in estimating beta include all of the following EXCEPT:
A) The time horizon used
B) The index used as the market portfolio
C) The price of the stock
D) The method used to extrapolate from past betas to future betas
Q2) California Gold Mining's beta with the market is closest to:
A) 0.9
B) 1.25
C) -0.9
D) -1.25
Q3) Which of the following statements is false?
A) The market capitalization is the total market value of its outstanding shares.
B) The market portfolio is the portfolio of all risky investments.
C) Many practitioners believe it insensible to use the CAPM and the security market line as a practical means to estimate a stock's required return and therefore a firm's equity cost of capital.
D) To estimate the equity cost of capital using the CAPM, the first thing we need to do is identify the market portfolio.
Q4) Describe two methods that can be used to estimate a firm's debt cost of capital.
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: Investor Behaviour and Capital Market
Efficiency
Available Study Resources on Quizplus for this Chatper
74 Verified Questions
74 Flashcards
Source URL: https://quizplus.com/quiz/66148
Sample Questions
Q1) Which of the following statements is false?
A) Nonzero alphas may merely indicate that the wrong market proxy is beings used; they do not necessarily indicate forgone positive NPV investment opportunities.
B) The true market portfolio contains much more than just stocks, it includes bonds, real estate, art, precious metals, and any other investment vehicles available.
C) If the true market portfolio is efficient, but the proxy portfolio is not highly correlated with the true market portfolio, then the true market portfolio will not be efficient and stocks will have nonzero alphas.
D) Much of the investment wealth cannot be included in the proxy for the market portfolio since it does not trade in competitive markets.
Q2) The size effect reflects the fact that returns of small stocks appear ________ even accounting for their ________ beta.
A) high; lower
B) low; higher
C) low; lower
D) high; higher
Q3) Explain why the market portfolio proxy may not be efficient.
To view all questions and flashcards with answers, click on the resource link above.
Page 15
Chapter 14: Financial Options
Available Study Resources on Quizplus for this Chatper
56 Verified Questions
56 Flashcards
Source URL: https://quizplus.com/quiz/66149
Sample Questions
Q1) When the firm's assets are worth ________ the required debt payment,the put is ________; the owner of the put option will therefore exercise the option and receive the difference between the required debt payment and the firm's asset value.
A) less than; in-the-money
B) more than; in-the-money
C) less than; out-of-the-money
D) more than; out-of-the-money
Q2) Which of the following statements is false?
A) An American call on a non-dividend-paying stock has the same price as its European counterpart.
B) The price of any call option on a non-dividend-paying stock always exceeds its intrinsic value.
C) It is never optimal to exercise a call option on a dividend-paying stock early - you are always better off just selling the option.
D) If the present value of the dividend payment is large enough, the time value of a European call option can be negative, implying that its price could be less than its intrinsic value.
To view all questions and flashcards with answers, click on the resource link above.
Page 16
Chapter 15: Option Valuation
Available Study Resources on Quizplus for this Chatper
42 Verified Questions
42 Flashcards
Source URL: https://quizplus.com/quiz/66150
Sample Questions
Q1) ________ on a positive beta stock have very large ________ betas,respectively.
A) Calls and puts; negative and positive
B) Calls and puts; positive and negative
C) Puts and calls; positive and negative
D) None of the above
Q2) Which of the following statements is correct?
A) Prior to the Black-Scholes formula, most economists and practitioners anticipated that mathematical formulas could be derived that could accurately price financial securities such as options.
B) Without the Black-Scholes formula, the job of corporate managers would be very different: many corporations would bear much less risk than they now do.
C) The most important factors contributing to the huge growth in the types of financial securities that are available today are the techniques that everyone uses to discount them.
D) It is not an exaggeration to say that the techniques developed by Black, Scholes, and Merton to value options changed the course of financial economics and gave birth to a new profession: financial engineering.
To view all questions and flashcards with answers, click on the resource link above.
Page 17
Chapter 16: Real Options
Available Study Resources on Quizplus for this Chatper
57 Verified Questions
57 Flashcards
Source URL: https://quizplus.com/quiz/66151
Sample Questions
Q1) Given the embedded option to sell the plant,the value of your plant will be closest to:
A) $5.0 million
B) $4.0 million
C) $6.5 million
D) $8.0 million
Q2) Mortgage interest rates ________ Government of Canada bond rates because mortgages have ________ that the bonds do not have.
A) are lower than; an abandonment option
B) are higher than; a growth option
C) are lower than; a growth option
D) are higher than; an abandonment option
Q3) Describe the two factors that affect the value of an investment timing option?
Q4) Because most growth options are likely to be ________,the growth component of firm value is likely to be ________ than the ongoing assets of the firm.
A) out-of-the-money; riskier
B) in-the-money; riskier
C) out-of-the-money; more certain
D) in-the-money; more certain
To view all questions and flashcards with answers, click on the resource link above.
Page 18
Chapter 17: Capital Structure in a Perfect Market
Available Study Resources on Quizplus for this Chatper
86 Verified Questions
86 Flashcards
Source URL: https://quizplus.com/quiz/66152
Sample Questions
Q1) According to MM Proposition 1,the stock price for With is closest to:
A) $8.00
B) $24.00
C) $6.00
D) $12.00
Q2) In a perfect capital market,the total value of a firm is ________ the market value of the total cash flows generated by its assets and is not affected by its choice of capital structure.
A) greater than B) smaller than C) equal to D) not related to
Q3) Suppose that to raise the funds for the initial investment the firm borrows $80,000 at the risk free rate,then the cash flow that equity holders will receive in one year in a strong economy is closest to:
A) $0
B) $6,000
C) $33,000
D) $10,000
To view all questions and flashcards with answers, click on the resource link above.
Page 19
Chapter 18: Debt and Taxes
Available Study Resources on Quizplus for this Chatper
84 Verified Questions
84 Flashcards
Source URL: https://quizplus.com/quiz/66153
Sample Questions
Q1) In 2005,the effective tax rate for debt holders was closest to:
A) 58%
B) 35%
C) 40%
D) 65%
Q2) Assuming that the risk is the same as the loan,the present value of LCMS' interest tax shield is closest to:
A) $45.5 million
B) $20.0 million
C) $24.5 million
D) $35.0 million
Q3) The total of Rosewood's net income and interest payments is closest to:
A) $270 million
B) $355 million
C) $290 million
D) $450 million
Q4) If Flagstaff currently maintains a .8 debt to equity ratio,then calculate the value of Flagstaff's interest tax shield.
To view all questions and flashcards with answers, click on the resource link above. Page 20
Chapter 19: Financial Distress, managerial Incentives, and Information
Available Study Resources on Quizplus for this Chatper
99 Verified Questions
99 Flashcards
Source URL: https://quizplus.com/quiz/66154
Sample Questions
Q1) If it is managed efficiently,then the expected market value of Luther's assets is closest to:
A) $300 million
B) $260 million
C) $240 million
D) $280 million
Q2) Which of the following statements is false?
A) Equity holders expect to receive dividends and the firm is legally obligated to pay them.
B) A firm that fails to make the required interest or principal payments on the debt is in default.
C) In extreme cases, the debt holders take legal ownership of the firm's assets through a process called bankruptcy.
D) After a firm defaults, debt holders are given certain rights to the assets of the firm.
Q3) Assume that in the event of default,20% of the value of MI's assets will be lost in bankruptcy costs and suppose that MI has zero-coupon debt with a $140 million face value due next year.Calculate the value of levered equity,the value of debt,and the total value of MI with leverage.
To view all questions and flashcards with answers, click on the resource link above. Page 21
Chapter 20: Payout Policy
Available Study Resources on Quizplus for this Chatper
92 Verified Questions
92 Flashcards
Source URL: https://quizplus.com/quiz/66155
Sample Questions
Q1) Which of the following statements is false?
A) With a stock dividend, a firm does not pay out any cash to shareholders. As a result, the total market value of the firm's assets and liabilities, and therefore of its equity, is unchanged.
B) If the price of the stock falls too low, a company can engage in a reverse split and reduce the number of shares outstanding.
C) Stock dividends of 50% or higher are generally referred to as stock splits.
D) Rather than pay a dividend using cash or shares of its own stock, a firm can also distribute shares of a subsidiary in a transaction referred to as an off-shoot.
Q2) When a firm ________ its dividend,it sends a ________ signal to investors that management expects to be able to afford the higher dividend for the foreseeable future.
A) decreases; positive
B) increases; negative
C) increases; positive
D) None of the above
Q3) Calculate the effective tax disadvantage for retaining cash in 1999,2001,and 2005.
To view all questions and flashcards with answers, click on the resource link above. Page 22
Chapter 21: Capital Budgeting and Valuation With Leverage
Available Study Resources on Quizplus for this Chatper
94 Verified Questions
94 Flashcards
Source URL: https://quizplus.com/quiz/66156
Sample Questions
Q1) Describe three simplifying assumptions that we make in valuing a project.
Q2) The ________ for a project will depend on the characteristics of both the project and the firm.
A) maximal leverage
B) minimal leverage
C) nominal leverage
D) optimal leverage
Q3) The reason that the Air Transportation Safety and System Stabilization Act,which established the Air Transportation Stabilization Board (ATSB)in the United States of America,gives the U.S.carriers an advantage over Canadian carriers is because
A) the act enables the U.S. carriers to obtain loans at the same level of interest rate as Canadian air carriers.
B) the act enables the U.S. carriers to obtain loans at a lower interest rate than they would without the guarantee.
C) the act enables the U.S. carriers to obtain loans at the higher level of interest rate as Canadian air carriers.
D) the act breaks the advantages of interest rate that Canadian carriers have enjoyed for many years.
To view all questions and flashcards with answers, click on the resource link above. Page 23
Chapter 22: Valuation and Financial Modelling: a Case Study
Available Study Resources on Quizplus for this Chatper
47 Verified Questions
47 Flashcards
Source URL: https://quizplus.com/quiz/66157
Sample Questions
Q1) Assuming that Ideko has a EBITDA multiple of 9.4,then the continuation enterprise value of Ideko in 2010 is closest to:
A) $181.7 million
B) $152.8 million
C) $272.8 million
D) $301.7 million
Q2) What is the purpose of the sensitivity analysis?
Q3) Describe the major approach in estimating the cost of capital when attempting to evaluate an acquisition of a private firm.
Q4) The unlevered beta for Nike is closest to:
A) 0.70
B) 1.00
C) 1.50
D) 0.60
Q5) The unlevered beta for Luxottica is closest to:
A) 1.00
B) 0.60
C) 0.70
D) 1.50
To view all questions and flashcards with answers, click on the resource link above. Page 24
Chapter 23: The Mechanics of Raising Equity Capital
Available Study Resources on Quizplus for this Chatper
49 Verified Questions
49 Flashcards
Source URL: https://quizplus.com/quiz/66158
Sample Questions
Q1) Which of the following statements is false?
A) In recent years, the investment banking firm of W.R. Hambrecht and Company has attempted to change the IPO process by selling new issues directly to the public using an online auction IPO mechanism called Open IPO.
B) The lead underwriter is the primary banking firm responsible for managing the deal. The lead underwriter provides most of the advice and arranges for a group of other underwriters, called the syndicate, to help market and sell the issue.
C) Because of the potential conflict of interest, the underwriter will not make a market in the stock after the issue.
D) The SEC requires that companies prepare a registration statement, a legal document that provides financial and other information about the company to investors, prior to an IPO. Company managers work closely with the underwriters to prepare this registration statement and submit it to the SEC.
Q2) How much money did Luther raise?
Q3) What will the offer price of these shares be if Luther is selling 800,000 shares?
Q4) Describe the four characteristics of IPOs that puzzle financial economists.
Q5) What will the proceeds from the IPO be if Luther is selling 1.1 million shares ?
To view all questions and flashcards with answers, click on the resource link above.
Page 25
Chapter 24: Debt Financing
Available Study Resources on Quizplus for this Chatper
49 Verified Questions
49 Flashcards
Source URL: https://quizplus.com/quiz/66159
Sample Questions
Q1) What kind of corporate debt has a maturity of less than 10 years?
A) Asset-backed bonds
B) Debentures
C) Notes
D) Mortgage bonds
Q2) The ________ provision sets the call price as the ________ of the remaining coupons.
A) Canada Call; current value
B) Canada Call; future value
C) Canada Call; adjusted value
D) Canada Call; present value
Q3) Treasury securities that are pure discount bonds with original maturities ranging from a few days to 26 weeks are called
A) TIPS.
B) Treasury bonds.
C) Treasury notes.
D) Treasury bills.
Q4) What is the Yield to Maturity (YTM)on this bond?
Q5) What is the Yield to Maturity (YTM)on this bond?
Q6) What is the Yield to Call (YTC)on this bond?
Page 26
To view all questions and flashcards with answers, click on the resource link above.
Chapter 25: Leasing
Available Study Resources on Quizplus for this Chatper
58 Verified Questions
58 Flashcards
Source URL: https://quizplus.com/quiz/66160
Sample Questions
Q1) Suppose that instead of leasing the bulldozer,the company is considering purchasing a bulldozer outright by borrowing the purchase price using a four-year annuity loan.The monthly loan payments for a four-year loan to purchase the bulldozer are closest to:
A) $2,115
B) $1,825
C) $1,870
D) $1,750
Q2) Which of the following statements is false?
A) The lease-equivalent loan is the loan that is required on the purchase of the asset that leaves the purchaser with the same obligations as the lessor would have.
B) Lease obligations themselves could trigger financial distress.
C) When a firm enters into a lease, it is committing to lease payments that are a fixed future obligation of the firm.
D) When a firm leases an asset, it is effectively adding leverage to its capital structure (whether or not the lease appears on the balance sheet for accounting purposes).
Q3) If St.Martin purchases the CT scanner,what is the amount of the lease-equivalent loan?
To view all questions and flashcards with answers, click on the resource link above.
Chapter 26: Working Capital Management
Available Study Resources on Quizplus for this Chatper
45 Verified Questions
45 Flashcards
Source URL: https://quizplus.com/quiz/66161
Sample Questions
Q1) Which of the following money market investments is a short-term,unsecured debt obligation issued by a large corporation? The minimum denomination is $25,000,but most have a face value of $100,000 or more.
A) Banker's Acceptance
B) Commercial Paper
C) Repurchase Agreement
D) Certificates of Deposit (CD)
E) Treasury Bill
Q2) KT Enterprises would like to construct and operate a new ice skating rink.In addition to the capital expenditures on the rink,management estimates that the project will require an investment today of $220,000 in net working capital.The firm will recover the investment in net working capital fifteen years from today,when management anticipates closing the rink.The discount rate for this type of cash flow is 8% per year.Calculate the present value of the cost of working capital for the ice skating rink.
Q3) Luther's Accounts Payable days is closest to:
A) 39 days
B) 32 days
C) 59 days
D) 42 days
To view all questions and flashcards with answers, click on the resource link above.
Page 28
Chapter 27: Short-Term Financial Planning
Available Study Resources on Quizplus for this Chatper
49 Verified Questions
49 Flashcards
Source URL: https://quizplus.com/quiz/66162
Sample Questions
Q1) Luther Industries wants to borrow $1 million for two months.Using its inventory as collateral,it can obtain a 10% (APR)loan (compounded monthly).The lender requires that a warehouse arrangement be used.The warehouse fee is $10,000,payable at the end of the two months.Calculate the effective annual rate of this loan for Luther Industries.
Q2) Positive cash flow shocks ________ demand for short-term financing while negative cash flow shocks ________ short-term financing needs. A) do not create; can create B) create; create C) do not create; cannot create D) create; cannot create
Q3) Luther Industries is offered a $1 million dollar loan for four months at an APR of 9%.Luther's bank requires that the firm maintain a compensating balance equal to 5% of the loan amount in a non-interest bearing account and the bank charges a 1% origination fee.Calculate the the effective annual rate (EAR)for this loan.
Q4) Kinston Industries issued $4,000,000 in commercial paper which matures in six months and received $3,876,000.Calculate the effective annual rate that Kinston is paying.
To view all questions and flashcards with answers, click on the resource link above. Page 29
Chapter 28: Mergers and Acquisitions
Available Study Resources on Quizplus for this Chatper
52 Verified Questions
52 Flashcards
Source URL: https://quizplus.com/quiz/66163
Sample Questions
Q1) This period is known for known for "strategic" or "global" deals that were more likely to be friendly and to involve companies in related businesses; these mergers often were designed to create strong firms on a scale that would allow them to compete globally:
A) 1960s
B) 1970s
C) 1980s
D) 1990s
Q2) If Martin pays no premium to acquire Luther,what will the earnings per share be after the merger?
Q3) Savings that come from combining the marketing and distribution of different types of related products.are called
A) horizontal integration.
B) vertical integration.
C) economies of scale.
D) economies of scope.
Q4) What is a white knight?
Q5) Assume that Martin pays no premium to acquire Luther.Calculate Martin's price-earnings (P/E)ratio both pre- and post-merger.
To view all questions and flashcards with answers, click on the resource link above. Page 30
Chapter 29: Corporate Governance
Available Study Resources on Quizplus for this Chatper
49 Verified Questions
49 Flashcards
Source URL: https://quizplus.com/quiz/66164
Sample Questions
Q1) What is corporate governance?
Q2) What are some of the negative effects of increasing the sensitivity of managerial pay to firm performance?
Q3) While the Sarbanes-Oxley Act (SOX)contains many provisions,the overall intent of the legislation was to improve the accuracy of information given to both boards and to shareholders.SOX attempted to achieve this goal in all of the following ways EXCEPT
A) overhauling incentives and independence in the auditing process.
B) mandating the separation of the positions of CEO and Chairman of the Board.
C) stiffening penalties for providing false information.
D) forcing companies to validate their internal financial control processes.
Q4) ________ is perhaps the most important reason for the success of the corporate organizational form.
A) The separation of ownership and planning
B) The separation of ownership and organizing
C) The separation of ownership and leadership
D) The separation of ownership and control
Q5) What is the difference between inside,gray,and outside directors?
Q6) Describe the main requirements of the Sarbanes-Oxley Act of 2002.
Q7) How does a pyramid structure work?
To view all questions and flashcards with answers, click on the resource link above. Page 31
Chapter 30: Risk Management
Available Study Resources on Quizplus for this Chatper
52 Verified Questions
52 Flashcards
Source URL: https://quizplus.com/quiz/66165
Sample Questions
Q1) Luther Industries needs to borrow $50 million in cash.Currently long-term AAA rates are 9%.Luther can borrow at 9.75% given its current credit rating.Luther is expecting interest rates to fall over the next few years,so it would prefer to borrow at the short-term rates and refinance after rates have dropped.Luther's management is afraid,however,that its credit rating may fall which could greatly increase the spread the firm must pay on new borrowings.How can Luther benefit from the expected decline in future interest rates without exposure to the risk that the potential future changes to its credit ratings brings?
Q2) The Century 22 Fund has invested in a portfolio of mortgage-backed securities that has a current market value of $245 million.The duration of this portfolio of mortgage-backed securities is 14.7 years.The fund has borrowed to purchase these securities,and the current value of its liabilities (i.e.,the current value of the bonds Century 22 has issued)is $160 million.The duration of these liabilities is 5.4 years.What is the initial duration of the equity for the Century 22 fund?
Q3) In December 2005,the spot exchange rate for the British Pound was CND$1.7188/£.Suppose that at the same time the one-year interest rate in Canada was 4.85% and the one-year interest rate in Great Britain was 3.15%.Based on these rates,what forward exchange rate is consistent with no arbitrage?
To view all questions and flashcards with answers, click on the resource link above.
32
Chapter 31: International Corporate Finance
Available Study Resources on Quizplus for this Chatper
45 Verified Questions
45 Flashcards
Source URL: https://quizplus.com/quiz/66166
Sample Questions
Q1) Because obtaining forward rate quotes for as long as four years in the future is difficult,managers normally use the covered ________ to compute ________.
A) interest rate parity; the forward rates
B) price parity; the forward rates
C) interest rate parity; the spot rates
D) price parity; the spot rates
Q2) How do we make adjustments when a project has inputs and outputs in different currencies?
Q3) What is the pound present value of the project?
Q4) Currency swaps allow firms to mitigate their exchange rate risk exposure between ________,while still making investments and raising funds in the most attractive locales.
A) assets and liabilities
B) long-term liabilities and equity
C) assets and equity
D) equity and liabilities
Q5) What conditions cause the cash flows of a foreign project to be affected by exchange rate risk?
Q6) What is the dollar present value of the project?
To view all questions and flashcards with answers, click on the resource link above. Page 33