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FINC 600 Midterm Quiz

FINC 600 Midterm Quiz

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Author: Trudy Webb
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Question 1 of 25
4.0/ 4.0 Points
 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 
 
Question 2 of 25
4.0/ 4.0 Points
 
Which of the following investment rules does not use the time value of the money concept?
   A.Net present value 
   B.Internal rate of return 
 C.The payback period 
   D.All of the above use the time value concept 
 
Question 3 of 25
4.0/ 4.0 Points
 
The unique risk is also called the:
   A.Unsystematic risk 
   B.Diversifiable risk 
   C.Firm specific risk 
  D.All of the above 
 
Question 4 of 25
2.0/ 4.0 Points
 
What are some of the important points to remember while estimating the cash flows of a project?
 
The most important points are
 
1) They are estimates. So there can be deviations
 
2) Some huge loss may completely change the return from product.
 
3) Other risks like market risks, reinvestment risk etc. may affect the cash flow pattern
 
Question 5 of 25
4.0/ 4.0 Points
 
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% 
 
 Question 6 of 25
4.0/ 4.0 Points
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 
 
Question 7 of 25
4.0/ 4.0 Points
 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 
 
Question 8 of 25
0.0/ 4.0 Points
 If the Wall Street Journal Quotation for a company has the following values close: 55.14; Net chg: = + 1.04; then the closing price for the stock for the previous trading day was?
   A.$56.18 
   B.$54.10 
C.$55.66 
   D.None of the above. 
 
Question 9 of 25
4.0/ 4.0 Points
 
For example, in the case of an electric car project, which of the following cash flows should be treated as incremental flows when deciding whether to go ahead with the project?
   A.The cost of research and development undertaken for developing the electric car in the past three years 
   B.The annual depreciation charge 
C.Tax savings resulting from the depreciation charges 
   D.Dividend payments 
 
 
Question 10 of 25
4.0/ 4.0 Points
 
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 
 
 
Question 11 of 25
4.0/ 4.0 Points
 
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 
 

 
 
 
 
 
 
 
            
 
 
 
 
 
 
 
 
 


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