Week 1 Practice Quiz Return to Assessment List
375597
Week 1 Practice Q
Part 1 of 1 -
12.0/ 15.0 Points
1.0/ 1.0 Points Question 1 of 15 As a legal entity a corporation can perform the following functions except: I) borrow money; II) lend money; III) sue and be sued; IV) vote
A.I and II only
B.I, II, and III only
C.IV only
D.I, II, III and IV
Answer Key: C 1.0/ 1.0 Points Question 2 of 15 A firm's investment decision is also called the:
A.Financing decision
B.Liquidity decision
C.Capital budgeting decision
D.None of the above
Answer Key: C 1.0/ 1.0 Points Question 3 of 15 The following are important functions of financial markets: I) Source of financing; II) Provide liquidity; III) Reduce risk; IV) Source of information
A.I only
B.I and II only
C.I, II, III, and IV
D.IV only
Answer Key: C 1.0/ 1.0 Points Question 4 of 15 The mixture of debt and equity, used to finance a corporation is also known as:
A.Capital budgeting
B.Capital structure
C.Investing
D.Treasury
Answer Key: B
1.0/ 1.0 Points Question 5 of 15 The following are some of the actions shareholders can take if the corporation is not performing well:
A.Replace the board of directors in an election.
B.Force the board of directors to change the management team.
C.Sell their shares of stock in the corporation.
D.Any of the above
Answer Key: D 0.0/ 1.0 Points Question 6 of 15 Major disadvantages of the Sarbanes-Oxley Act of 2002 (SOX) are the following except:
A.good investor protection
B.increase in compliance costs
C.that it constrains managers' ability to run the firm
D.that it may discourage development of human capital in the firm
Answer Key: A 1.0/ 1.0 Points Question 7 of 15 Present Value is defined as:
A.Future cash flows discounted to the present at an appropriate discount rate
B.Inverse of future cash flows
C.Present cash flow compounded into the future
D.None of the above
Answer Key: A 0.0/ 1.0 Points Question 8 of 15 Present Value of $100,000 that is, expected, to be received at the end of one year at a discount rate of 25% per year is:
A.$80,000
B.$125,000
C.$100,000
D.None of the above
Answer Key: A Feedback: PV = (100,000)/(1 + 0.25) = 80,000
1.0/ 1.0 Points Question 9 of 15 If the present value of a cash flow generated by an initial investment of $200,000 is $250,000, what is the NPV of the project?
A.$250,000
B.$50,000
C.$200,000
D.None of the above
Answer Key: B Feedback: NPV = -200,000 + 250,000 = 50,000
1.0/ 1.0 Points Question 10 of 15 According to the net present value rule, an investment in a project should be made if the:
A.Net present value is greater than the cost of investment
B.Net present value is greater than the present value of cash flows
C.Net present value is positive
D.Net present value is negative
Answer Key: C 0.0/ 1.0 Points Question 11 of 15 An annuity is defined as
A.Equal cash flows at equal intervals of time for a specified period of time
B.Equal cash flows at equal intervals of time forever
C.Unequal cash flows at equal intervals of time forever
D.None of the above
Answer Key: A 1.0/ 1.0 Points Question 12 of 15 The concept of compound interest is most appropriately described as:
A.Interest earned on an investment
B.The total amount of interest earned over the life of an investment
C.Interest earned on interest
D.None of the above
Answer Key: C 1.0/ 1.0 Points Question 13 of 15 The following entities issue bonds to raise long-term loans except:
A.The federal government
B.State and local governments
C.Companies
D.Individuals
Answer Key: D 1.0/ 1.0 Points Question 14 of 15 A 5-year treasury bond with a coupon rate of 8% has a face value of $1000. What is the semi-annual
interest payment? Annual interest payment = 1000(0.08) = $80; Semi-annual payment = 80/2 = $40
A.$80
B.$40
C.$100
D.None of the above
Answer Key: B Feedback: Annual interest payment = 1000(0.08) = $80; Semi-annual payment = 80/2 = $40
1.0/ 1.0 Points Question 15 of 15 A bond with duration of 10 years has yield to maturity of 10%. This bond's volatility is:
A.9.09%
B.6.8%
C.14.6%
D.6.0%
Answer Key: A Feedback: Volatility (%) = Duration/(1 + yield) = 10/1.1 = 9.09%
