Finance Test with Answers - 1054 Words

Test 1 Question 1 0 out of 1 points Which of the following securities will likely have the highest liquidity premium? Answer Selected Answer: a. U.S. Treasury Bond maturing in 2027 Correct Answer: c. Aaa-rated corporate bond maturing in 2015 not actively traded Question 2 0 out of 2 points The curse of competitive markets Answer Selected Answer: a. Means that companies cannot earn exceptional profits. Correct Answer: c. May be lessened by obtaining patents for new ideas that protect companies from competitors. Question 3 2 out of 2 points Two assets, A and B, have the same expected return (10%) and the same level of risk (average). Which of the following†¦show more content†¦sole proprietorship. Correct Answer: d. sole proprietorship and general partnership. Question 20 0 out of 1 points Project A is expected to generate positive cash flow of $1 million in 10 years while Project B is expected to generate $500,000 in 5 years. Therefore, Answer Selected Answer: b. Project B is preferred because its cash flow is expected to be received sooner than the cash flow from Project A. Correct Answer: d. Project B may be preferred to Project A if the opportunity cost of money is high enough. Question 21 3 out of 3 points A 65 year-old man is retiring and can take either $50,000 in cash or an ordinary annuity that promises to pay him $6,000 per year for as long as he lives. Which of the following statements is most correct? Answer Selected Answer: d. If the interest rate is 15% per year, the man will be better off taking the $50,000 up front. Correct Answer: d. If the interest rate is 15% per year, the man will be better off taking the $50,000 up front. Question 22 1 out of 1 points Shareholder wealth maximization means: Answer Selected Answer: c. maximizing the price of existing common stock. Correct Answer: c. maximizing the price of existing common stock. Question 23 3 out of 3 points You are going to pay $100 into an account at the beginning of each of the next 40 years. At the beginning ofShow MoreRelatedCorporate Finance Test with Answers1734 Words   |  7 PagesCorporate Finance: An Introduction (Welch) Chapter 1 Introduction 1.1 The Goal of Finance: Relative Valuation 1) Which of the following statements is true? A) In finance, it is important to determine an asset s absolute value. B) The relative value of any asset is, at best, a lucky guess. C) The true value of an asset is unaffected by externalities such as interest rate levels, the state of the economy, etc. D) Valuation is not an exact scienceRead MoreFinance Course Test with Answers1287 Words   |  6 PagesQuestion 1 (5 points) $100 today is worth the SAME as $100 tomorrow. Your Answer Score Explanation True False Correct 5.00 Correct. You understand time value Total 5.00 / 5.00 Question Explanation We have assumed that time value of money is positive. 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