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1) what is a key provision regarding ceos in the sarbanes-oxley act of 2002?
a.ceos cannot hold options in the firms they direct
b.ceos total compensation cannot exceed a limit set by the sec
c.ceos are personally liable for any mistakes on company financial filings
d.ceos are prohibited from commenting on company filings to the sec
2) roxy international has earnings per share of $4.05; just paid dividend $2.03 and
expects a roi next year (and the foreseeable future) of 15% what is the retention ratio?
a.50.12%
b.64.88%
c.49.88%
d.35.12%
3) currently, a 91-day treasury bill sells at a 2.5% discount. what is the price of a $1
million investment?
a.$993,967.12
b.$871,250.00
c.$993,750.00
d.$993,680.56
4) if you invest $2,500 in a bank account that pays 6% interest compounded quarterly,
how much will you have in five years?
a.$2,546.96
b.$3,367.14
c.$8,017.84
d.$13,267.04
5) the process of identifying which long-lived investment projects a firm should
undertake is known as:
a.capital spending
b.capital budgeting
c.capital hedging
d.capital investment
6) you have a $1 million capital budget and must make the decision about which
investments your firm should undertake for the coming year. there are three projects
available and the cash flows of each project appear below. assume a cost of capital of
12%. which project or projects do you select?
a.project 1
b.project 2
c.project 3
d.project 1 & project 2
7) you are trying to find the correct yield spread for a standard and poors rated a+,
7-year maturity bond. you find that a 7-year maturity, aa- bonds spread is 65 basis
points while that of a 7-year maturity a bonds spread is 80 basis points. which of the
following should be a possibility for the spread of the a+ rated bond?
a.64 basis points
b.70 basis points
c.80 basis points
d.both b and c are possible spreads for the bond
8) suppose you are ready to buy your first house. to buy the house, you will take out a
$140,000 mortgage from the bank. the bank offers you the mortgage for 30 years at an
apr of 6.0% with interest compounded monthly. for your tenth monthly payment, what
is the reduction in principal?
a.$145.77
b.$156.18
c.$327.24
d.$359.64
9) which of the following statements is false?
a.dual-class stock is more prevalent in the united states than it is in other countries
b.when a corporation has dual-class stock, the corporate insiders generally concentrate
their holdings in the superior voting-share class, while ordinary investors tend to hold
relatively more of the inferior voting-class stock
c.one purpose of a dual-class structure is to allow insiders to raise the capital needed to
finance growth without losing voting control
d.all of the above statements are false
e.only statements (a) and (b) are false
10) roxy international has a lease with payments of $750,000 made at the beginning of
each year. if no purchase option exists, and the company is in the 40% tax bracket, what
is the annual after-tax cash outflow on the lease?
a.$300,000
b.$500,000
c.$100,000
d.$200,000
11) banks perform which of the following functions:
a.collecting payments on checks sent to their corporate customers
b.making payment on the checks written by their customers to other parties
c.providing information-processing services to small- and medium-sized businesses
d.handling large-volume transactions, such as payroll disbursements
e.all of the above
12) the country with the highest level of systematic risk is:
a.russia
b.poland
c.taiwan
d.usa
13) according to the capm (capital asset pricing model), the security market line is a
straight line. the intercept of this line should be equal to
a.zero
b.the expected risk premium on the market portfolio
c.the risk-free rate
d.the expected return on the market portfolio
