Fin.

6335 Sample Exam Questions
1. . The constant dividend growth model: I. assumes that dividends increase at a constant rate forever. II. can be used to compute a stock price at any point of time. III. states that the market price of a stock is only affected by the amount of the dividend. IV. considers capital gains but ignores the dividend yield. A. I only B. II only C. III and IV only D. I and II only E. I, II, and III only 2. The underlying assumption of the dividend growth model is that a stock is worth: A. the same amount to every investor regardless of their desired rate of return. B. the present value of the future income which the stock generates. C. an amount computed as the next annual dividend divided by the market rate of return. D. the same amount as any other stock that pays the same current dividend and has the same required rate of return. E. an amount computed as the next annual dividend divided by the required rate of return. 3. All else constant, a coupon bond that is selling at a premium, must have: A. a coupon rate that is equal to the yield to maturity. B. a market price that is less than par value. C. semi-annual interest payments. D. a yield to maturity that is less than the coupon rate. E. a coupon rate that is less than the yield to maturity. 4.. The market price of a bond is equal to the present value of the: A. face value minus the present value of the annuity payments. B. annuity payments plus the future value of the face amount. C. face value plus the present value of the annuity payments. D. face value plus the future value of the annuity payments. E. annuity payments minus the face value of the bond. 5.. All else constant, the net present value of a typical investment project increases when: A. the discount rate increases. B. each cash inflow is delayed by one year. C. the initial cost of a project increases. D. the rate of return decreases. E. all cash inflows occur during the last year of a project's life instead of periodically throughout the life of the project.

the project's rate of return exceeds the rate of inflation. current assets minus current liabilities. B. D. D. For any positive rate of interest.6. truth-in-lending laws. The annual percentage rate increases as the number of compounding periods per year increases. they return the initial cash outlay within three years or less. short-term solvency D. The stated rate is the same as the effective annual rate. E. market value 10. C. long-term solvency C. they create value for the owners of the firm. A. Financial ratios that measure a firm's ability to pay its bills over the short run without undue stress are known as _____ ratios. current liabilities divided by current assets. The effective annual rate is lower than the annual percentage rate when an interest rate is compounded quarterly.9. E. divided by current assets. asset management B. B. current liabilities minus inventory. Key 1D 2B 3D 4C 5D 6A 7E 8B 9C 10B . Banks prefer more frequent compounding on their savings accounts. current assets divided by current liabilities. E. Which one of the following statements concerning interest rates is correct? A. The annual percentage rate equals the effective annual rate when the rate on an account is designated as simple interest.S. B. C. D. An effective annual rate is the rate that applies if interest were charged annually. C. The current ratio is measured as: A. cash on hand divided by current liabilities. The annual percentage rate considers interest on interest. The primary reason that company projects with positive net present values are considered acceptable is that: A. Which one of the following statements concerning the annual percentage rate is correct? A. D. The rate of interest you actually pay on a loan is called the annual percentage rate. When firms advertise the annual percentage rate they are violating U. B. 7. profitability E. E. 8. the required cash inflows exceed the actual cash inflows. the investment's cost exceeds the present value of the cash inflows. the effective annual rate will always exceed the annual percentage rate. C.

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