1) the minimum dollar amount required by an investor when taking a position in a
futures contract is called the
a.initial margin
b.maintenance margin
c.margin account
d.none of the above
2) a firm is considering investing $10 million today to start a new product line. the
future of the project is unclear however and depends on the state of the economy. the
project will last 4 years. the yearly cash flows for the project are shown below for the
different states of the economy. what is the expected npv for the project if the cost of
capital is 15%?
a.-$17.14 million
b.-$12.13 million
c.-$10.36 million
d.-$4.25 million
3) a company can sell its product for $6 per unit. the variable costs for each unit are $2,
while the fixed costs of operation are $1200. what is the break-even point for this
product?
a.200 units
b.300 units
c.450 units
d.550 units
4) william and theodore have decided to start a travel business called excellent
adventures. since their business primarily involves time-travel their clients may be
harmed during a small but significant portion of the travels. consequently, william and
theodore would like a business form that will shield their personal wealth from any
legal claims that the firm might be subject to after one of the travel mishaps. if william
and theodore are the only investors in this u.s. domiciled firm, which legal form of
organization would be best for excellent adventures to protect both william and
theodore?
a.sole proprietorship
b.partnership
c.limited partnership
d.corporation
5) an agent of a firm could be any of the following:
a.100% owner of the firm
b.the irs agent in charge of auditing the firms tax return
c.an employee who does not own any proportion of the firm
d.a supplier of the firm
6) narrbegin: bavarian brew
bavarian brew
bavarian brew, an unlevered firm, has an expected ebit of $500,000. the required return
on assets for the firms assets is 10%. the company has 250,000 shares outstanding. the
company is considering raising $1 million in debt with a required return of 6% and
would use the proceeds to repurchase outstanding stock.
narrend
what is the present value of bavarian brews debt tax shield after the restructuring?
assume corporate taxes of 34%.
a.$340,000
b.$1,000,000
c.$660,000
d.$0
7) consider the adjusted closing prices for roxy stock
what is the variance of returns for roxy stock?
a.0.005
b.0.007
c.0.081
d.0.070
8) a $200 investment in an account that pays 7% continuous interest would be worth
how much in twenty years?
a.$774
b.$792
c.$811
d.$819
9) what is a basic guide for financial decision making?
a.make decisions where the benefits exceed the costs
b.make decisions where the total benefits exceed the total costs
c.make decisions where the average benefits exceed the fixed costs
d.make decisions where the average benefits exceed the average costs
10) if you were trying to describe the effect on the yield curve that certain investors
have a definite preference for the maturity of the bonds that they invest in, then you
would be referring to
a.the expectations theory
b.the liquidity preference theory
c.the preferred habitat theory
d.none of the above
11) narrbegin: hillary
hillary investments
between 1999 and 2003, hillary investments has produced returns as follows:
narrend
what is the variance of the return of hillary investments?
a..01072
b..00268
c..00214
d.none of the above
12) which of the following statements is true?
a.the foreign exchange market is a physical marketplace located in new york
b.the foreign exchange market is the world’s largest financial market
c.prices for floating currencies are set by global supply and demand
d.both (b) and (c) are true
e.all of the above are true