Archives: Quiz

In the long run, monopolistically competitive firms produce a level of output such that: A. P > MC. B. P = ATC. C. ATC > minimum of average costs. D. All of the statements associated with this question are correct. […]

In a competitive market, the market demand is Qd = 60 – 6P and the market supply is Q = 4P. A price ceiling of $3 will result in a A. shortage of 30 units. B. shortage of 15 units. […]

In order for isoquants to have a diminishing marginal rate of substitution, they must be: A. L-shaped. B. straight lines. C. vertical. D. None of the statements is correct. You are the manager of a monopoly that faces a demand […]

Consider a market characterized by two firms that set the same price in the market, P = $10. Total market demand is QT = 100 – 2P, of which the two firms share equally. Based on this information, we can […]

Suppose the growth rate of the firms profit is 7 percent, the interest rate is 10 percent, and the current profits of the firm are $120 million. What is the value of the firm? A. $44 million B. $4,280 million […]

The minimum wage A. is an example of a price floor. B. leads to an increase in the number of people employed in unskilled jobs. C. leads to a decrease in the number of people employed in skilled jobs. D. […]

Refer to the following game. Which of the following is true? A. A dominant strategy for firm A is “high price.” B. There does not exist a dominant strategy for firm A. C. A dominant strategy for firm B is […]

A two-way network that links users and in which the per-unit value of the service increases as the size of the network increases is a: A. positive externality known as an indirect network externality. B. negative externality known as an […]

You are a monopolist with the following cost and demand conditions: P = 100 – 2Q and C(Q) = 50 + Q2.a. Determine the profit-maximizing output and price.b. Graph this solution.c. Show your profits and the deadweight loss to society […]

Suppose the growth rate of the firms profit is 4 percent, the interest rate is 5 percent, and the current profits of the firm are $75 million. What is the value of the firm? A. $2,111.5 million B. $7,766.6 million […]

If a manager is not the owner, the manager: A. receives the full benefit of good decisions. B. bears the full cost of bad decisions. C. does not receive the full benefit nor the full cost of his or her […]

Regardless of the economic environment, every firm will maximize profits by operating at the minimum point of its average total cost curves. Is this statement true or false? Explain. If you put $1,000 in a savings account at an interest […]

Which one of the following statements related to the income statement is correct? A. Depreciation has no effect on taxes. B. Interest paid is a noncash item. C. Taxable income must be a positive value. D. Net income is distributed […]

A 12-year, semiannual coupon bond is priced at $1,102.60. The bond has a $1,000 face value and a yield to maturity of 5.33 percent. What is the coupon rate? A. 5.00 percent B. 5.25 percent C. 5.50 percent D. 6.00 […]

Dover Wholesalers sells products exclusively to Benn Retailer. Benn Retailer buys exclusively from Dover Wholesalers. Dover Wholesalers has a receivables period of 44 days, an inventory period of 8 days, and a payables period of 63 days. Benn Retailer has […]

You would like to invest $19,000 and have a portfolio expected return of 12.3 percent. You are considering two securities, A and B. Stock A has an expected return of 15.6 percent and B has an expected return of 10.3 […]

A stock has produced returns of 16.6 percent, 3.4 percent, 11.7 percent, and -9.2 percent over the past four years, respectively. What is the geometric average return? A. 5.16 percent B. 5.47 percent C. 6.23 percent D. 6.61 percent E. […]

Which one of the following statements is correct? A. The internal rate of return is the most reliable method of analysis for any type of investment decision. B. The payback method is biased toward short-term projects. C. The modified internal […]

Which one of the following is a drawback of cash dividends? A. Firms may have to forgo positive net present value projects. B. Stock prices tend to increase as annual dividend amounts increase. C. Cash dividends support stock prices. D. […]

You are given the following information concerning Around Town Tours:Debt: 8,500, 7.1 percent coupon bonds outstanding, with 14 years to maturity and a quoted price of 102.6. These bonds pay interest semiannually.Common stock: 265,000 shares of common stock selling for […]

One year ago, you purchased 100 shares of a stock. This morning you sold those shares and realized a total return of 8.2 percent. Given this information, you know for sure the: A. stock price increased by 8.2 percent over […]

The transaction motive for holding cash refers to the need to have cash for which one of the following purposes? A. Safety margin B. Investment opportunities C. Daily operations D. Financial reserve E. Bargain opportunities Windsor stock has produced returns […]

You want to save $200 a month for the next 24 years and hope to earn an average rate of return of 11 percent. How much more will you have at the end of the 24 years if you invest […]

Which one of the following statements is correct, all else held constant? A. Beta is used to compute the return on equity and the standard deviation is used to compute the return on preferred. B. A decrease in a firms […]

Which one of the following occurs when interest rate parity exists between Countries A and B? A. Country A investors are indifferent between risk-free investments in Countries A and B. B. Forward exchange rates for Countries A and B must […]

Which one of the following types of bonds permits its issuer to forego paying interest payments if certain natural events cause significant losses? A. PETS B. PUT C. CAT D. PINES E. LIBOR Which one of the following has the […]

A U.S. Treasury bond pays 9.5 percent interest. You are in the 25 percent tax bracket. What is your after-tax yield on this bond? A. 1.28 percent B. 2.23 percent C. 7.13 percent D. 8.35 percent E. 9.50 percent A […]

Weston Steel purchased a new coal furnace six years ago at a cost of $2.2 million. Last year, the government changed the emission requirements and this furnace cannot meet those standards. Thus, Weston can no longer use the furnace, nor […]

Portfolio diversification eliminates which one of the following? A. Total investment risk B. Portfolio risk premium C. Market risk D. Unsystematic risk E. Reward for bearing risk You are comparing two annuities. Annuity A pays $100 at the end of […]

Who determines the offer price in a Dutch auction? A. Lead underwriter B. Chief financial officer of the issuing firm C. SEC D. Bidders E. Board of directors of the issuing firm Grannys Home Remedy has a $30 million bond […]

Travis borrowed $10,000 four years ago at an annual interest rate of 7 percent. The loan term is six years. Since he borrowed the money, Travis has been making annual payments of $700 to the bank. Which type of loan […]

The concept of marginal taxation is best exemplified by which one of the following? A. Kirbys paid $120,000 in taxes while its primary competitor paid only $80,000 in taxes. B. Johnsons Retreat paid only $45,000 on total revenue of $570,000 […]

The Egg House just borrowed $260,000 to build a new restaurant. The loan terms call for equal annual payments at the end of each year. The loan is for 15 years at an APR of 8 percent. How much of […]

The balance sheet of Binger, Inc. has the following balances: What is the amount of the change in net working capital? A. -$8,100 B. -$7,400 C. $7,700 D. $8,000 E. $8,100 LaDoris & Mike, Inc. sells earnings forecasts for Chinese […]

The market rate of return is 14.8 percent and the risk-free rate is 4.45 percent. Galaxy Co. has 54 percent more systematic risk than the overall market and has a dividend growth rate of 5.5 percent. The firms stock is […]

Paddle Fans & More has a marginal tax rate of 34 percent and an average tax rate of 23.7 percent. If the firm earns $138,500 in taxable income, how much will it owe in taxes? A. $31,366.67 B. $31,500.00 C. […]

Which one of the following best describes a portfolio? A. Risky security B. Security equally as risky as the overall market C. New issue of stock D. Group of assets held by an investor E. Investment in a risk-free security […]

The T-shirt Hut successfully managed to reduce its general and administrative costs this year. This cost improvement will increase which of the following ratios?I. Profit marginII. Return on assetsIII. Total asset turnoverIV. Return on equity A. I and II only […]

Pannick Motors has projected the following sales for the coming year. Sales in the year following this one are projected to be 12 percent greater in each quarter. Assume the company places orders during each quarter equal to 45 percent […]

Soft and Cuddly is considering a new toy that will produce the following cash flows. Should the company produce this toy if the firm requires a 15 percent rate of return? A. Yes, because the projects rate of return is […]

A common-size balance sheet helps financial managers determine: A. which customers are paying on a timely basis. B. if costs are increasing faster or slower than sales. C. if changes are occurring in a firms mix of assets. D. if […]

Which one of the following is the rate of return an investor earns on a bond before adjusting for inflation? A. Nominal rate B. Real rate C. Dirty rate D. Coupon rate E. Clean rate Trendsetters has a cost of […]

A stock has returns for five years of 23 percent, -17 percent, 8 percent, 22 percent, and 3 percent, respectively. The stock has an average return of ______ percent and a standard deviation of _____ percent. A. 7.80; 13.54 B. […]

Which one of the following statements is correct? A. All secondary markets are dealer markets. B. All secondary markets are broker markets. C. All stock trades between existing shareholders are secondary market transactions. D. All stock transactions are secondary market […]

Which one of the following is evidence of indebtedness? A. Terms of sale B. Credit cost curve C. Credit instrument D. Concentration policy E. Credit policy Which one of the following is a disbursement account into which funds are transferred […]

Quali Tech wants to raise $21 million to purchase equipment by issuing new securities. Management estimates the issue will cost the firm $320,000 for accounting, legal, and other costs. The underwriting spread is 7.5 percent and the issue price is […]

A 7 percent bond has a yield to maturity of 6.5 percent. The bond matures in seven years, has a face value of $1,000, and pays semiannual interest payments. What is the amount of each coupon payment? A. $30.00 B. […]

Which one of the following is a correct statement, all else held constant? A. The present value is inversely related to the future value. B. The future value is inversely related to the period of time. C. The period of […]

Flemington Farms is evaluating an extra dividend versus a share repurchase. In either case, $15,000 would be spent. Current earnings are $2.80 per share, and the stock currently sells for $75 per share. There are 2,800 shares outstanding. Ignore taxes […]

Assume you can currently exchange one U.S. dollar for one hundred Japanese yen. Also assume the inflation rate will be 2.5 percent annually in the U.S. and 2 percent in Japan. Given these assumptions, how many yen should you expect […]