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If IBM has a beta of 1.2 when the risk-free rate is 6% and the expected return on the
market portfolio is 18%, the expected return on IBM is:
a. 17.2%
b. 20.4%
c. 22.1%
d. 23.6%
One significant feature of DIDMCA was that it:
a. expanded the ability of the Fed to influence unemployment rates
b. expanded Fed control over the reserve requirements of non-member banks
c. created the FDIC
d. none of the above
Tom Vu deposited $5,000 in a savings account that paid 8% interest compounded
quarterly. What is the effective rate of interest?
a. 8.00%
b. 8.24%
c. 8.33%
d. 8.46%
Which of the following is a different concept from the other three?
a. required rate of return
b. cost of capital
c. discount rate
d. net profit margin
In recent years, the principal market for bankers' acceptances has been:
a. domestic banks
b. domestic and foreign business corporations
c. foreign banks
d. none of the above
The portion of current assets financed through long-term financing is referred to as the:
a. net working capital
b. current ratio
c. seasonal current assets
d. fixed assets
The M1 definition of the money supply includes which of the following items?
a. currency
b. demand deposits and other checkable deposits at depository institutions
c. travelers' checks
d. all of the above
A breakdown in the international gold standard occurred during:
a. the 1880-1914 period
b. World War I
c. World War II
d. the depression of the 1930s
The method of evaluating the firm's performance over time is known as:
a. trend analysis
b. cross-sectional analysis
c. industry comparative analysis
d. Due Pont analysis
On the income statement, net profit after tax is generally defined as:
a. operating profit minus operating expenses
b. operating profit minus cost of goods sold
c. operating profit minus interest
d. operating profit minus interest minus taxes
The First Bank of the United States ceased operations because:
a. it was superseded by the Second Bank of the United States
b. of the opposition of state banking interests
c. its charter had expired and there was no provision for its renewal
d. the need to provide financing for the Civil War was not supported by Congress
According to the Gordon dividend model, which of the following variables would not
affect a stock's price?
a. the firm's expected growth rate in dividends
b. the number of shares outstanding
c. the shareholder's required return
d. all the above affect stock price
BP has a cash conversion cycle of 80 days, an average collection period of 25 days, and
an average age of inventory of 50 days. Based on this information, BPs operating cycle
is ________ days.
a. 5
b. 75
c. 105
d. 130
e. none of the above
Discounting has the effect of reducing the available funds received by the borrower
while raising the effective interest rate.
The estimated cash inflows are affected by the sales forecast and customer payment
patterns.
A market order is an order for immediate purchase or sale at the best possible price.
Callable bonds can be redeemed prior to maturity by the firm.
The EPS/EBIT indifference level represents the level of EBIT at which the firm would
be indifferent between two different capital structures because they both result in the
same level of EPS.
When income taxes are cut, disposable income is slowly increased under our system of
tax withholding.
In a capital budgeting context, a project's required rate of return is called the yield to
maturity.
