The cost of capital is a single rate that reflects the average return paid to investors who
provide the firm’s capital.
The availability of funds under a line of credit is not guaranteed by the lender.
Including financing costs in the cash flow estimates would have the effect of counting
them twice, once as a cash flow component, and once in the estimated discount rate.
Greenmail is an attempt to stop a hostile takeover by offering to buy any stockholder’s
shares at a price above market.
A Eurobond is denominated in the currency of the country in which the bond is issued.
A ____ is licensed to trade securities on behalf of investors.
A.stockbroker
B.securities analyst
C.market maker
D.corporation
Large companies tend to do which of the following types of business planning?
A.Strategic planning
B.Operational planning
C.Budgeting and forecasting
D.All of the above
One year ago a $1,000 face value 6% coupon bond was selling for $918.93. Since then,
the market return decreased by two percentage points. The bond pays interest
semiannually and now has four years to maturity. The bond’s price today is:
A.$1,035.46.
B.$1,053.27.
C.$1,000.00.
D.$932.67.
Which of the following will preclude the use of the Gordon Model for calculating the
intrinsic value of a stock?
A.The constant growth percentage is greater than the market return.
B.D0is unknown.
C.The constant growth percentage and the market return are very close numerically.
D.Both a. and c. above will preclude use of the Gordon model.
E.All of the above will preclude use of the Gordon model.
Which of the following is an outcome of labor migration and illegal immigration?
A.Manufacturing moves to low labor cost countries.
B.Information technology jobs are lost at home.
C.Outsourcing of knowledge-based jobs to developed countries
D.A strain is placed on developed nations€ social support infrastructure.
If a 30-year, $1,000 bond has a 9% coupon and is currently selling for $826, its current
yield is:
A.$90.
B.9.0%.
C.9%.
D.12.0%.
In the framework of financial leverage, risk can be viewed as:
A.the degree of variation in the return on an investment.
B.the variation in financial performance measured by ROE and EPS.
C.Neither a nor b
D.Both a and b
The direct quotes for euros and British pounds are $.90 and $1.50, respectively. What is
the cross-rate between euros and pounds expressed in units of pounds per euro?
A.13.50 pounds
B.0.60 pounds
C.1.35 pounds
D.1.66 pounds
Williamson Inc. is considering a project with the following cash flows. Calculate the
payback period of the project.
A.1.1 years
B.2.1 years
C.3.1 years
D.4.1 years
Investment banks:
A.help companies issue new securities.
B.are part of the direct transfer of funds from investors to companies.
C.generally line up buyers for new securities before they’re issued.
D.All of the above