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1) market signals will help to allocate capital efficiently only if investors are acting
_____.
a.on the basis of their individual hunches.
b.as directed by financial experts.
c.as dominant forces in the economy.
d.on accurate information.
2) the value of a derivative security _________.
a.depends on the value of another related security
b.affects the value of a related security
c.is unrelated to the value of a related security
d.can be integrated only by calculus professors
3) the over-the-counter securities market is a good example of _________.
a.an auction market
b.a brokered market
c.a dealer market
d.a direct search market
4) the financial statements of flathead lake manufacturing company are shown below:
note: the common shares are trading in the stock market for $15 per share
refer to the financial statements of flathead lake manufacturing company. in 2012
flathead generated ______ of ebit for every dollar of sales.
a.$.075
b.$.086
c.$.092
d.$.099
5) the tax effect of a traditional retirement plan is to _____ taxes.
a.evade
b.postpone
c.erase
d.avoid
6) an order to buy or sell a security at the current price is a ______________.
a.limit order
b.market order
c.stop-loss order
d.stop-buy order
7) assuming semiannual compounding, a 20-year zero coupon bond with a par value of
$1,000 and a required return of 12% would be priced at _________.
a.$97.22
b.$104.49
c.$364.08
d.$732.14
8) rank the following types of markets from least integrated and organized to most
integrated and organized:
i. brokered markets
ii. continuous auction markets
iii. dealer markets
iv. direct search markets
a.iv, ii, i, iii
b.i, iii, iv, ii
c.ii, iii, iv, i
d.iv, i, iii, ii
9) most of the stock price response to a corporate earnings or dividend announcement
occurs within ________________.
a.about 30 seconds
b.about 10 minutes
c.6 months
d.2 years
10) the term latency refers to _____.
a.the lag between when an order is placed on the nyse and when it is executed.
b.the amount of time it takes to accept, process, and deliver a trading order.
c.the time it takes to implement new rules and procedures for stock exchanges and
computer trading systems.
d.the lag between when an order is executed and when the investor takes possession of
the securities.
11) a zero-coupon bond is selling at a deep discount price of $430. it matures in 13
years. if the yield to maturity of the bond is 6.7%, what is the duration of the bond?
a.6.7 years
b.8 years
c.10 years
d.13 years
12) the free cash flow to the firm is reported as $275 million. the interest expense to the
firm is $60 million. if the tax rate is 35% and the net debt of the firm increased by $33
million, what is the free cash flow to the equity holders of the firm?
a.$269 million
b.$296 million
c.$305 million
d.$327 million
