Portfolio diversification eliminates which one of the following?
A. Total investment risk
B. Portfolio risk premium
C. Market risk
D. Unsystematic risk
E. Reward for bearing risk
You are comparing two annuities. Annuity A pays $100 at the end of each month for 10
years. Annuity B pays $100 at the beginning of each month for 10 years. The rate of
return on both annuities is 8 percent. Which one of the following statements is correct
given this information?
A. The present value of Annuity A is equal to the present value of Annuity B.
B. Annuity B will pay one more payment than Annuity A will.
C. The future value of Annuity A is greater than the future value of Annuity B.
D. Annuity B has both a higher present value and a higher future value than Annuity A.
E. Annuity A has a higher future value but a lower present value than Annuity B.
During the past year, Arther Anderson Services paid $360,800 in interest along with
$48,000 in dividends. The company issued $230,000 of stock and $200,000 of new
debt. The company reduced the balance due on the old debt by $225,000. What is the
amount of the cash flow to creditors?
A. -$88,200
B. $51,400
C. $161,800
D. $385,800
E. $585,800
Assume there are no taxes or imperfections. Given this assumption, which one of the
following statements is correct?
A. A cash dividend has no effect on the market price of the payers stock.
B. A cash dividend decreases shareholder wealth.
C. Stock repurchases decrease the market value per share.
D. Both a cash dividend and a share repurchase increase a firms PE ratio.
E. A stock repurchase has the same effect on a firms market value balance sheet as does
a cash dividend.
Which one of the following terms refers to the best option that was foregone when a
particular investment is selected?
A. Side effect
B. Erosion
C. Sunk cost
D. Opportunity cost
E. Marginal cost
On April 14, McCallisters purchased $10,000 worth of inventory. The terms of sale
were 2/10, net 30. The implicit interest is _____ and the effective annual rate is _____
percent.
A. $200; 14.95
B. $200; 44.59
C. $400; 14.95
D. $400; 27.38
E. $400; 44.59
True Blue Transport has a current stock price of $27. For the past year, the company
had net income of $2,187,400, total equity of $13,892,300, sales of $26,511,000, and
2.5 million shares outstanding. What is the market-to-book ratio?
A. 3.54
B. 3.81
C. 3.99
D. 4.27
E. 4.86
Which one of the following is the most ethical practice related to cash disbursement
management?
A. Intentionally delaying payments by creating a complex accounts payable system
B. Taking the cash discount but paying after the discount period
C. Paying a supplier from a zero-balance account
D. Purposely losing a suppliers invoice and requiring the supplier to submit another
copy
E. Mailing a check from the most remote location possible
Suppose that Martin Metal Products changes its policy and starts requiring all of its
customers to pay within 20 days rather than the 30 days that it currently allows. Which
one of the following will result from this change?
A. Increase in receivables period
B. Increase in inventory period
C. Decrease in cash cycle
D. Increase in operating cycle
E. Increase in accounts payable period
The 7 percent annual coupon bonds of IPO, Inc. are selling for $1,021. The bonds have
a face value of $1,000 and mature in seven years. What is the yield to maturity?
A. 6.42 percent
B. 6.62 percent
C. 6.66 percent
D. 6.68 percent
E. 6.70 percent
Chestnut Tree Farms has identified the following two mutually exclusive projects:
Over what range of discount rates would you choose Project A?
A. 8.28 percent or less
B. 8.28 percent or more
C. 9.33 percent or more
D. 9.55 percent or less
E. 9.55 percent or more
Given the following exchange rates, which of the following currencies are selling at a
premium?
A. Japanese yen only
B. Swiss franc and Canadian dollar only
C. U.S. pound only
D. Canadian dollar, Swiss franc, and UK pound only
E. All four currencies