1) one of the main reasons for the name derivatives is that
a.the value of the underlying instrument derives its value from the derivative instrument
b.the instruments derive their value from the value of other instruments
c.calculus is required to convert their market price to a dollar price
d.none of the above
2) hollywood productions has a $4 contribution margin for the new dvd they are
releasing to the general public. the dvd sells for $20. if the fixed costs to produce the
dvd were $500,000, how many units must be sold for hollywood productions to break
even?
a.25,000 units
b.31,250 units
c.75,000 units
d.125,000 units
3) in recent years some firms have
a.become more focused on maximizing profits rather than stockholder wealth
b.become more focused on keeping a broader group of stakeholders happy rather than
just the stockholders
c.become less interested in managing risks arising from fluctuations in interest rates,
commodity prices and currency prices
d.both (b) and (c)
e.none of the above
4) a company that seeks to pay a fixed dollar amount in dividends each period is
following a
a.constant nominal payment policy
b.constant payout ratio policy
c.low-regular-and extra policy
d.earnings management policy
5) the schedule that indicates the portions of the total accounts receivable balance that
have been outstanding for specified periods of time is known as the
a.payment pattern monitoring
b.aging of accounts receivable
c.credit scoring
d.just-in-time system
e.none of these
6) what is the single most common concern among managers engaged in risk
management?
a.interest rate risk
b.currency exchange risk
c.raw materials price risk
d.none of the above
7) louis bonds will mature in 16 years; the coupon rate of the bond is 5% paid
semiannually, if the discount rate is 4% what is the bonds current yield?
a.4.47%
b.2.23%
c.4.45%
d.4.24%
8) narrbegin: exhibit 15-1
exhibit 15-1
you are working to forecast the cash disbursements for a manufacturing company. sales
are forecasted to be $175,000, $200,000, $225,000, and $250,000 for january, february,
march, and april, respectively. the firm purchases 25% of each amount in cash and will
then pay 70% of the credit purchase in the month following the purchase with the
remainder paid in full two months after the purchase.
narrend
refer to exhibit 15-1. what is the amount of february sales to be collected in march for
the company?
a.$206,625
b.$105,000
c.$56,250
d.none of the above
9) what is the risk premium?
a.it is the risk associated with investing in treasury bonds
b.it is the difference in annual returns between common stocks and treasury bills
c.it is the annual return associated with investing in treasury bonds
d.it is the variance in stock market returns over the last fifty years
10) a merger in which both the acquirer and target disappear as separate corporations,
combining to form an entirely new corporation with new common stock is known as
a(n):
a.statutory merger
b.subsidiary merger
c.acquisition
d.consolidation
e.takeover
11) which statement correctly describes proposition i of modigliani and miller?
a.the value of the firm is independent of its capital structure
b.if there is no default risk, firms should exclusively use debt to finance projects
c.if there is no default risk, firms should exclusively use equity to finance projects
d.the value of the firms tax shields depends solely on the amount of debt issued
12) which of the following is not a method used by analysts to estimate an assets
expected return?
a.historical approach
b.probabilistic approach
c.risk-based approach
d.estimation approach
13) emma is evaluating a treasury bill. it is a $1 million face value with a discount of
2.55% and maturing in 91 days. what is the purchase price?
a.$1,000,000.00
b.$987,108.33
c.$1,025,500.00
d.$993,554.17