2/8/2021 Self Assessment Quiz: Attempt review

Dashboard / My courses / DMS-32103(f20)-MGMT202-MS-DMS-F20-1st-Wkends-BWP / Week 8 / Self Assessment Quiz

Started on Monday, 7 December 2020, 11:43 AM

State Finished
Completed on Monday, 7 December 2020, 11:56 AM
Time taken 12 mins 53 secs
Marks 28.00/30.00
Grade 9.33 out of 10.00 (93%)

Question 1 A business that has some fixed operating costs but has no debt of any type and no preferred stock can be considered
Correct risk-free.
Mark 1.00 out of
1.00 Select one:
a. True

b. False 

Question 2 A firm's overall cost of capital is simply the sum of the firm's cost of equity, cost of debt, and cost of preferred stock.
Correct

Mark 1.00 out of Select one:

1.00
a. True 

b. False

Question 3 A measure of risk per unit of expected return.

Correct

Mark 1.00 out of Select one:

1.00
a. correlation coefficient

b. beta

c. coefficient of variation 

d. standard deviation

Question 4 A quick approximation of the typical firm's cost of equity may be calculated by.
Correct

Mark 1.00 out of Select one:

1.00
a. subtracting a 5 percent risk discount from the firm's after-tax cost of debt

b. adding a 5 percent risk premium to the firm's after-tax cost of debt

c. subtracting a 5 percent risk discount from the firm's before-tax cost of debt

d. adding a 5 percent risk premium to the firm's before-tax cost of debt 

Question 5 A statistical measure of the degree to which two variables (securities' returns) move together.
Correct

Mark 1.00 out of Select one:

1.00
a. variance

b. certainty equivalent

c. coefficient of variation

d. covariance 

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Question 6 All other things being the same, if the firm raises funds by selling common stock, it will increase its degree of financial
Correct leverage.
Mark 1.00 out of
1.00 Select one:
a. False

b. True 

Question 7 An aggressive common stock would have a beta.

Correct

Mark 1.00 out of Select one:

1.00
a. equal to zero

b. greater than one 

c. less than one

d. equal to one

Question 8 An income statement is also called a profit and loss statement.

Correct

Mark 1.00 out of Select one:

1.00
a. True 

b. False

Question 9 Beta is the slope of.

Correct

Mark 1.00 out of Select one:

1.00
a. the security market line

b. a characteristic line 

c. the CAPM

d. the capital market line

Question 10 If a bond sells at a high premium, then which of the following relationships is true
Correct

Mark 1.00 out of Select one:

1.00
a. YTM is greater than the coupon rate

b. YTM is equal to the coupon rate

c. None of the above

d. YTM is lower than the coupon rate 

Question 11 If an investor may have to sell a bond prior to maturity and interest rates have risen since the bond was purchased, the
Correct investor is exposed to.
Mark 1.00 out of
1.00 Select one:
a. the coupon effect

b. a perpetuity

c. interest rate risk 

d. an indefinite maturity

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Question 12 If the intrinsic value of a stock is greater than its market value, which of the following is a reasonable conclusion.
Correct

Mark 1.00 out of Select one:

1.00
a. The stock offers a high dividend payout ratio

b. The stock has a low level of risk

c. The market is undervaluing the stock 

d. The market is overvaluing the stock

Question 13 In the formula Gordons DDM, what does g represent.

Correct

Mark 1.00 out of Select one:

1.00
a. the interest payment from a bond

b. the expected dividend yield from a common stock

c. the dividend yield from a preferred stock

d. the expected price appreciation yield from a common stock 

Question 14 Interest rates and bond prices.

Correct

Mark 1.00 out of Select one:

1.00
a. sometimes move in the same direction, sometimes in opposite directions

b. move in opposite directions 

c. move in the same direction

d. have no relationship with each other (they are independent)

Question 15 Investors can expect to be compensated with higher returns for bearing avoidable or unsystematic risk.
Correct

Mark 1.00 out of Select one:

1.00
a. True

b. False 

Question 16 Lower financial leverage is related to the use of additional __________.

Correct

Mark 1.00 out of Select one:

1.00
a. Variable costs

b. Fixed costs

c. Debt financing

d. Common equity financing 

Question 17 Preferred stock, like debt, could provide financial leverage to a firm.
Correct

Mark 1.00 out of Select one:

1.00
a. True 

b. False

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Question 18 The common stock of a company must provide a higher expected return than the debt of the same company because.
Incorrect

Mark 0.00 out of Select one:

1.00
a. there is greater demand for stock than for bonds

b. there is more systematic risk involved for the common stock

c. there is less demand for stock than for bonds

d. there is a market premium required for bonds 

Question 19 The expected rate of return on a bond if bought at its current market price and held to maturity.
Correct

Mark 1.00 out of Select one:

1.00
a. current yield

b. coupon yield

c. yield to maturity 

d. capital gains yield

Question 20 The greater and more stable the firm's expected future cash flows, the greater its debt capacity.
Correct

Mark 1.00 out of Select one:

1.00
a. True 

b. False

Question 21 The greater the beta, the ________of the security involved.
Correct

Mark 1.00 out of Select one:

1.00
a. greater the avoidable risk

b. greater the unavoidable risk 

c. less the avoidable risk

d. less the unavoidable risk

Question 22 The return on common stocks is a combination of income paid to the stockholder plus any appreciation in stock price.
Correct

Mark 1.00 out of Select one:

1.00
a. False

b. True 

Question 23 The risk-free rate is usually represented by the yield on short-term U.S. Treasury securities.
Correct

Mark 1.00 out of Select one:

1.00
a. False

b. True 

Question 24 This type of risk is avoidable through proper diversification.

Correct

Mark 1.00 out of Select one:

1.00
a. portfolio risk

b. unsystematic risk 

c. systematic risk

d. total risk

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Question 25 To calculate profit margin, divide sales into net income.

Incorrect

Mark 0.00 out of Select one:

1.00
a. True

b. False 

Question 26 Virgo Airlines will pay a $4 dividend next year on its common stock, which is currently selling at $100 per share. What is
Correct the market's required return on this investment if the dividend is expected to grow at 5% forever.
Mark 1.00 out of
1.00 Select one:
a. 7 percent

b. 9 percent 

c. 5 percent

d. 4 percent

Question 27 What's the value to you of a $1,000 face-value bond with an 8% coupon rate when your required rate of return is 15
Correct percent.
Mark 1.00 out of
1.00 Select one:
a. True

b. Less than its face value 

c. $1,000

d. More than its face value

Question 28 When the market's required rate of return for a particular bond is much less than its coupon rate, the bond is selling at.
Correct

Mark 1.00 out of Select one:

1.00
a. a premium 

b. a discount

c. face value

d. cannot be determined without more information

Question 29 You can reduce systematic risk by adding more common stocks to your portfolio.
Correct

Mark 1.00 out of Select one:

1.00
a. True

b. False 

Question 30 You can reduce systematic risk by adding more common stocks to your portfolio.
Correct

Mark 1.00 out of Select one:

1.00
a. True

b. False 

◄ CAPM Jump to... Enterprise risk management system ►

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