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1) narrbegin: stock returns
narrend
what is the average return of a portfolio that has 30% invested in stock a, 30% invested
in stock b and 40% invested in stock c?
a.9.92%
b.12.6%
c.7.59%
d.13.8%
2) what was the key impact to the jobs and growth tax reconciliation act of 2003?
a.it greatly reduced the risk and liability of owning a small business
b.it provided tax credits and incentives for corporations to maintain their operations in
the united states
c.it reduced the effect of double taxation on corporate earnings by lowering the tax rate
on corporate dividends
d.it reduced taxes in an effort to keep social security solvent through 2040
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) which of the following is not an example of a negative covenant?
a.borrowers may not sell accounts receivable to generate cash
b.the borrower is required to maintain a minimum level of net working capital
c.constraints associated with fixed assets regarding the liquidation, acquisition and
encumbrance
d.constraints associated with consolidation, merging or combining with another firm
e.all of the above are examples of negative covenants
5) suppose a firm is asked to pledge collateral for a term loan. which of the following is
likely to be least acceptable to the lender?
a.a rare book collection owned by the company
b.the firms inventory of industrial chemicals
c.the firms real estate holding
d.securities held by the firm for investment
6) operating leverage describes the relationship between...
a.ebit and sales
b.taxes and sales
c.debt and equity
d.fixed costs and variable costs
7) narrbegin: stock returns
narrend
what is the variance of returns for stock b?
a..00653
b..00607
c..00528
d..00721
8) extending payment beyond the due date in order to reduce the cash conversion cycle
a.is an accepted stretching of credit terms
b.is an unethical cash management practice
c.is an unethical cash management practice, but can be viewed as acceptable
d.is backwards; this actually increases the cash conversion cycle
9) bavarian brew issued convertible bonds with a par value of $1,000. the conversion
ratio on the bonds is 12.33, the current market price of the bonds is $933.75 and the
underlying stock currently sells at $35.25. what is the conversion price?
a.$33.25
b.$75.73
c.$54.36
d.$12.33
10) narrbegin: exhibit 17-1
exhibit 23-1
s&p 500 index; $250 index may 2004
narrend
refer to exhibit 23-1. what was the lowest value of the december contract on the day
quoted?
a.$265,500
b.$262,750
c.$264,837
d.$271,450
11) a system in which a countrys currency is pegged to the value of another currency
like the u.s. dollar, is called a
a.floating exchange rate system
b.fixed exchange rate system
c.managed floating rate system
d.currency board arrangement
12) narrbegin: bavarian brewhouse ipo
bavarian brewhouse ipo
bavarian brewhouse is planning an ipo. under the terms of the ipo, bavarian brewhouse
will issue 8 million shares at an offer price of $25 per share. the underwriter charges an
9% underwriting fee and direct costs are estimated to be $7 million. the stock is
expected to trade at $30 at the end of the first trading day.
narrend
what is the initial return earned by investors on this bavarian brewhouse ipo?
a.20%
b.15%
c.17%
d.22%
13) emma international recently conducted an ipo, emma received $52 per share and the
offer price was $54 per share and the stock price rose to $59 per share. what was the
total percentage cost of the ipo?
a.9.62%
b.12.96%
c.9.26%
d.13.46%
14) which of the following is true?
a.if a company files for bankruptcy, preferred stockholders claims are paid prior to
creditors claims
b.if a company files for bankruptcy, preferred stockholders claims are paid prior to
common stockholders claims
c.in the event of bankruptcy and subsequent liquidation, preferred stockholders only
receive funds after creditors and common stockholders
d.both (a) and (b)
e.none of the above
15) which of the following is a (are) key difference(s) a manager should note in
choosing between forward and futures contracts?
a.exchange trading makes forward contracts more liquid
b.futures contracts carry standardized terms, while forward contracts can be tailored to
meet specific needs
c.futures contracts have greater default risk than forward contracts
d.forward contracts require initial margin deposits and daily marking to market, while
futures do not
16) which of the following is a strength of the corporate form of business?
a.limited life of the business
b.unlimited access to capital
c.unlimited liability
d.double taxation of income
17) which of the following describes the collective action problem?
a.when a ceo fails to represent the interest of shareholders in daily decisions of the firm
b.when the shareholders of a firm fail to act in their own best interests
c.when the managers of a firm lack incentive to maximize shareholder wealth
d.when an individual stockholder spends time and resources monitoring managers,
bearing the cost, while the benefits go to all the shareholders in the firm
18) narrbegin: cboe
cboe
use the following information on cboe 13-week t-bill rate options to answer the
following question(s).
narrend
refer to cboe. if you used the oct 35 option to hedge rising rates, and the yield to
maturity (ytm) on 13-week bills is 3.75 percent at the option’s expiration, what is the
outcome of your hedge?
1. profit of $250 per contract
2. profit of $130 per contract
3. loss of $120 per contract
4. no gain or loss, the option expires worthless
19) louis international has earnings per share of $2.25; just paid dividend $1.05 and
expects a roi next year (and the foreseeable future) of 16% what is the dividend payout
ratio?
a.46.67%
b.16.00%
c.53.33%
d.30.67%
