1
FINA 3313 EXAM 2 Questions with Correct
Answers | Updated (100% Correct Answers)
Which component is more likely to be biased if book values are
used in the calculation of WACC rather than market values? Answer:
Common stock
Complete the following sentence. The WACC__________ Answer: For
a firm represents the risk and target capital structure of the firm's
existing assets as a whole.
The risk free rate currently have a return of 2.5% and the market
risk premium is 5.77%. If a firm has a beta of 1.42 Answer: what is
its cost of equity? , 0.025+1.42*(0.0577)=10.69%
If the Federal Reserve took action to increase interest rates a firm's
cost of capital would ____________ ceteris paribus. Answer: increase
Which of the following is correct for a bond priced at $1100 that
has ten years remaining until maturity and a 10% coupon with
semiannual payments? Answer: Each payment of interest equals
$50.
Which of the following bonds would be likely to exhibit a greater
degree of interest-rate risk? Answer: A zero-coupon bond with 30
years until maturity.
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, 2
The discount rate that makes the present value of a bond's
payments equal to its price is termed the: Answer: Yield to maturity
Which of the following is correct concerning real interest rates?
Answer: Real interest rates, if positive, indicate increased purchasing
power.
Suppose you have an investment in a stock that had a negative 50%
return (a loss) in the first year and a positive 50% return (a gain) in
the second year. The geometric returns is 0% Answer: false
scenario analysis Answer: an approach for assessing risk that uses
several possible alternative outcomes (scenarios) to obtain a sense
of variability among returns
range Answer: a measure of an asset's risk, which is found by
subtracting the return associated with the pessimistic outcome from
the return associated with the optimistic outcome
probability Answer: the chance that a given outcome will occur
probability distribution Answer: a model that relates probabilities to
the associated outcomes
The variance of an investment's returns is a measure of the: Answer:
volatility of the rates of return.
© 2025 All rights reserved
FINA 3313 EXAM 2 Questions with Correct
Answers | Updated (100% Correct Answers)
Which component is more likely to be biased if book values are
used in the calculation of WACC rather than market values? Answer:
Common stock
Complete the following sentence. The WACC__________ Answer: For
a firm represents the risk and target capital structure of the firm's
existing assets as a whole.
The risk free rate currently have a return of 2.5% and the market
risk premium is 5.77%. If a firm has a beta of 1.42 Answer: what is
its cost of equity? , 0.025+1.42*(0.0577)=10.69%
If the Federal Reserve took action to increase interest rates a firm's
cost of capital would ____________ ceteris paribus. Answer: increase
Which of the following is correct for a bond priced at $1100 that
has ten years remaining until maturity and a 10% coupon with
semiannual payments? Answer: Each payment of interest equals
$50.
Which of the following bonds would be likely to exhibit a greater
degree of interest-rate risk? Answer: A zero-coupon bond with 30
years until maturity.
© 2025 All rights reserved
, 2
The discount rate that makes the present value of a bond's
payments equal to its price is termed the: Answer: Yield to maturity
Which of the following is correct concerning real interest rates?
Answer: Real interest rates, if positive, indicate increased purchasing
power.
Suppose you have an investment in a stock that had a negative 50%
return (a loss) in the first year and a positive 50% return (a gain) in
the second year. The geometric returns is 0% Answer: false
scenario analysis Answer: an approach for assessing risk that uses
several possible alternative outcomes (scenarios) to obtain a sense
of variability among returns
range Answer: a measure of an asset's risk, which is found by
subtracting the return associated with the pessimistic outcome from
the return associated with the optimistic outcome
probability Answer: the chance that a given outcome will occur
probability distribution Answer: a model that relates probabilities to
the associated outcomes
The variance of an investment's returns is a measure of the: Answer:
volatility of the rates of return.
© 2025 All rights reserved
