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1) the right but not the obligation to produce oil from one of your existing oil wells can
be described as
a.a real option
b.a stock option
c.an interest rate option
d.a future
2) a bond is priced such that it has a 9% yield to maturity. however, inflation is expected
to be 2% per year over the remaining life of the bond. what is the real return for this
investment?
a.4.50%
b.6.86%
c.7.00%
d.9.00%
3) if a company is wanting to lessen the cost of a new security by imbedding a valuable
option in the security, then the company is most likely to issue
a.common stock
b.debt
c.convertible debt
d.preferred stock
4) calculate the tax disadvantage to organizing a u.s. business today, after passage of the
jobs and growth tax reconciliation act of 2003, as a corporation versus a partnership,
given the following assumptions. all earnings will be paid out as dividends, and
operating income before taxes will be $1,500,000. the effective corporate tax rate is
35%, and the tax rate on corporate dividends is 15%. the average personal tax rate for
partners in the business is 35%.
a.$146,250
b.$152,250
c.$166,850
d.$170,375
5) an investor has $10,000 invested in treasury securities and $15,000 invested in stock
uvw. uvw has a beta of 1.2. what is the beta of the portfolio?
a.0.00
b.0.72
c.1.20
d.1.60
6) if the exchange rate quote for the u.s. dollar and the euro is $1.1234/ and the
exchange rate quote for the u.s. dollar and the canadian dollar (c$) is $0.7258/c$ then
the cross exchange rate between euros and canadian dollars is
a.c$1.5478/
b.0.5478/c$
c.c$0.6461/
d.0.6461/c$
7) if you would like to work in finance by trading debt and equity securities for
customers, then which finance career classification should you target?
a.corporate finance
b.commercial banking
c.investment banking
d.money management
8) in the periods 2000-2010 the abnormal returns for the target firm was
a.-8.23%
b.-1.65%
c.21.92%
d.2.68%
9) you decide that your family would be comfortable living on an annual income of
$150,000, growing at 4% per year. youd also like to continue generating this cash flow
for your descendents, forever. with investment returns of 8%, how much wealth would
you need today to provide this income starting with $150,000 one year from now?
a.$1,250,000
b.$1,875,000
c.$1,904,218
d.$3,750,000
10) a bond pays $60 interest payments twice a year. what is the coupon rate for the
bond if the par value of the bond is $1,000?
a.6.00%
b.9.00%
c.12.00%
d.15.00%
11) consider the following macrs table for a 5-year asset. if an asset is purchased for
$250,000; with a shipping and istallation cost of $35,000 and an expected salvage value
of $20,000; what is the depreciation expense in the second year?
a. $ 80,000.00
b. $ 91,200.00
c. $ 84,800.00
d. $ 73,600.00
12) a company faces costs of 9% of the amount of cash raised for an ipo. if the
company needs to raise net $10 million, what is the total amount of money that needs to
be raised?
a.$10,800,000
b.$10,989,011
c.$12,456,875
d.$8,458,950
13) narrbegin: exhibit 21-1 hhi
exhibit 21-1
narrend
refer to exhibit 21-1. what is the hhi of this industry?
a.2,088
b.1,645
c.2,495
d.1,325
14) which of the following is a means of changing corporate control?
a.merger
b.management buyout
c.proxy contest
d.all of the above
15) narrbegin: bavarian brew bond
bavarian brew bond
bavarian brew is thinking about recalling $30 million of 15 year, $1,000 par value
bonds, that were issued ten years ago. the bonds carry a coupon rate of 7.8% and have a
call price of $1,110. initially the bonds generated total proceeds of $28.65 million and
the flotation costs were $500,000. bavarian brew wants to sell $30 million of 5 year,
$1,000 par value bonds with a 5.8% coupon rate to retire the old bonds. the flotation
costs on the new bond issue are estimated to be $525,000. due to having to issue the
new bonds before the old bonds can be retired the company expects a period of 3
months were they have to pay interest on the old and the new bonds. assume a tax rate
of 34%
narrend
refer to bavarian brew bond. what is the tax reduction caused by the unamortized
discount on the old bonds?
a.$1,500,000
b.$1,000,000
c.$340,000
d.$187,000
16) narrbegin: terry corporation
terry corporation
one year ago, jason purchased 50 shares of terry corporation stock at $20 per share.
today, one year later, the stock pays a $2 per share dividend and the price is now $22
per share.
narrend
refer to terry corporation. what is the capital gains yield on the investment for the one
year?
a.9.09%
b.10.00%
c.18.18%
d.20.00%
17) palooka products negotiates a venture capital investment contract, receiving $5
million today, with the expectation that the firm will seek an ipo in five years with an
expected value of $50 million. if the venture capital investor requires a 40% expected
return, what share of palooka products equity does it accept in exchange for its $5
million investment?
a.54%
b.38%
c.26%
d.14%
18) antitrust rules that ensure that all target shareholders receive the same offer price in
any tender offers initiated by the same acquirer, limiting the ability of acquirers to buy
minority shares cheaply with a two-tiered offer is known as:
a.fair price provisions
b.cash-out statutes
c.greenfield provisions
d.antitrust provisions
e.greenmail statutes
19) what is the term applied to a firm that offers shares to the general public for the first
time?
a.initial public offering
b.initial placed offering
c.investment plan offer
d.investment of public offers
