Professional Documents
Culture Documents
Topic: DIVIDENDS
1. Payments made out of a firm's earnings to its owners in the form of cash or stock are called:
A) Dividends.
B) Distributions.
C) Share repurchases.
D) Payments-in-kind.
E) Stock splits.
Answer: A
I. A corporate investor
II. A tax-exempt investor
III. An investor who does not need current income
IV. An investor in a relatively high personal income tax bracket
A) III only
B) I and II only
C) II and IV only
D) III and IV only
E) I, II, III and IV
Answer: D
Your firm is financed 100% with equity. There are 50,000 shares of stock outstanding with a market
price of $8 per share. Total earnings for the most recent year are $80,000. The firm has cash of $30,000
in excess of what is necessary to fund its positive NPV projects. The firm is considering using the cash to
pay an extra dividend of $30,000 or, alternatively, to repurchase $30,000 of stock. The firm has total
assets (including the $30,000 of excess cash) worth $400,000 (market value). For each of the questions
that follow, assume there are no transaction costs, taxes or other market imperfections.
Topic: CROSS-RATE
1. The implicit exchange rate between currencies found from explicit exchange rates quoted in some
third currency is called a(n) ___________________.
A) open exchange rate
B) cross-rate
C) backward rate
D) forward rate
E) interest rate
Answer: B
A) I only
B) II only
C) III only
D) I and III only
E) II and IV only
Answer: D
I. Your firm has large oil drilling and mining interests in one of the former Soviet republics. A
new government with a distinct anti-American agenda unexpectedly wins a majority in that
country's new parliament.
II. Your firm's wholly-owned Australian subsidiary is expanding rapidly and earning increased
profits; meanwhile, the U.S. dollar has been strengthening dramatically against the Australian
dollar for some time now. Your firm reports consolidated financial statements across all its
worldwide operations and subsidiaries.
III. You import computer chips from Korea for use in your U.S.-manufactured cellphone
handsets. You agree on the terms of sale and the number of chips to be purchased 90 days in
advance, but you do not pay the Korean contractor until the chips have actually been delivered to
your U.S. plant. You invoice your transaction in the Korean currency.
A) I only
B) II only
C) III only
D) I and II only
E) I, II and III
Answer: A
Topic: CROSS-RATES
19. Given the following exchange rate quotes for the Irish Punt (P), the Swiss Franc (SF) and the
U.S. Dollar ($): P 4 per $1; SF 10 per $1. What is the cross-rate for Punts per Swiss Franc?
A) P0.25 per SF1
B) P0.40 per SF1
C) P0.80 per SF1
D) P2.50 per SF1
E) P4.00 per SF1
Answer: B
Response: P/SF = (P/$) / (SF/$) = 4 / 10 = 0.40
Topic: CROSS-RATE
30. How many Euros are needed to buy one Australian dollar?
A) 0.353
B) 0.419
C) 0.462
D) 0.559
E) 2.166
Answer: C
Response: 1.0927 / 2.3669 = .4617
Use the following to answer questions 31-34:
Topic: CROSS-RATE
33. How many Canadian dollars are needed to buy one Danish krone?
A) 0.2386
B) 0.3612
C) 0.4800
D) 0.5985
E) 0.7044
Answer: A
Response: 1.6327 / 6.8440 = .2386
Topic: CROSS-RATE
34. How many Hong Kong dollars are needed to buy one Danish krone?
A) 1.4481
B) 1.7928
C) 2.3256
D) 2.5649
E) 3.4981
Answer: B
Response: 12.2699 / 6.8440 = 1.7928