According to portfolio theory, the most relevant risk for any widely traded individual
security is its:
A.unsystematic risk.
B.standard deviation.
C.covariance risk.
D.systematic risk.
A four-year annuity of $1,000 annual payments at the beginning of each year, with a
10% interest rate is worth how much today?
A.$2,914.67
B.$3,486.85
C.$3169.87
D.None of the above
Austerity in countries undergoing a sovereign debt crisis leads to:
A.higher government benefits.
B.higher taxes and lower government benefits.
C.increases in commerce.
D.the country€s loss of control over its own currency.
Which of the following is not a purpose of business planning?
A.Communicating information to investors
B.Making a statement of goals
C.Credibility and supporting detail
D.Provide pro forma statements based on hypothetical circumstances
An equity multiplier of 3 implies a debt ratio of:
A.33.33%.
B.66.67%.
C.50%.
D.99.99%.
Common stockholders:
A.have a residual claim on both income and assets.
B.are last in line in the event of bankruptcy.
C.have a higher claim on assets than preferred stockholders.
D.Both a & b
E.All of the above
Leigh Fibers has 6 million shares outstanding. This year Leigh will have operating
income (EBIT) of $36.4 million, interest expenses of $5.8 million, and depreciation
expenses of $6.2 million. What will be Leigh’s dividend per share if the company has a
payout ratio of 30%? Assume a marginal tax rate of 40%.
A.$0.92
B.$0.73
C.$1.09
D.$0.61
Which financial intermediary is not involved in the indirect method of financial
intermediation?
A.Investment banks
B.Insurance companies
C.Mutual funds
D.Pension funds
In dividend reinvestment plans, stockholders receive additional shares instead of cash
dividends. Shareholders:
A.are not taxed at the time of the dividend because they received no cash.
B.must pay tax on the full value of the new shares at the time they are sold.
C.must pay tax in the year of the dividend on the value used to buy the new shares.
D.must pay tax on the dividend amount when the shares are sold.
A preferred stock is an example of _____.
A.an annuity
B.an annuity due
C.a growing perpetuity
D.a perpetuity
Which of the following is not a source of risk?
A.Liquidity risk
B.Deferred consumption risk
C.Maturity risk
D.Default risk