FIN 341 EXAM 1 MOCK EXAM WITH ANSWER
RATIONALES 2026
◉ ROE does not consider risk or the amount of invested capital.
Answer: True
◉ Trying to maximize a companies ROE leads managers to
sometimes reject a project with a very acceptable ROE.
Answer: True
◉ ROE looks at return on the shareholders' investment, but
maximization of ROE in not desirable.
Answer: True
◉ A firm's ROA will equal the firm's ROE if no debt is used as capital.
Answer: True
◉ Upper corporate managers are highly motivated to give their
stockholders an appropriate return on the stock because in the
stockholders start selling the stock, the company's stock price will
decrease and the company can become a takeover target.
Answer: True
,◉ Stock prices have increased significantly since President Trump
was elected due to expectations that the U.S. economy will gain
strength in the future from lower corporate tax rates, repatriation of
corporate cash from abroad, and some deregulation of business.
Answer: True
◉ From World War I to 2000, the economy grew at a an average
growth rate of 3.5 % per year. From 2000 until today, it has grown at
about 1.5% on average per year.
Answer: False
◉ When interest rates are high, an investor should consider buying
bonds and then selling them once interest rates go back down if they
want to make capital gains on bonds.
Answer: True
◉ As U.S. rates go up, the dollar should strengthen and help U.S.
companies that import goods.
Answer: True
◉ The repeal of the Glass Steagall Act of 1933 under President
Clinton's administration has been partially blamed for the 2008-09
crisis.
, Answer: True
◉ In 2015, the U.S. had a trade deficit of about $800 million.
Answer: True
◉ The Volcker Rule has never actually taken affect, even though it's
in the Dodd Frank Bill. It was supposed to keep big banks from
taking on investments that could put the bill in bankruptcy.
Answer: True
◉ When a company buys it's own stock, its P/E ratio is decreased,
thus making its stock price decrease.
Answer: False
◉ The NASDAQ has acquired the Philadelphia Stock Exchange and
25% of the London Stock Exchange.
Answer: True
◉ If a stock's market price is more than the perceived intrinsic value
of the stock, investor demand for purchasing the stock will decrease
and the stock's market price will rise to seek equilibrium.
Answer: False
RATIONALES 2026
◉ ROE does not consider risk or the amount of invested capital.
Answer: True
◉ Trying to maximize a companies ROE leads managers to
sometimes reject a project with a very acceptable ROE.
Answer: True
◉ ROE looks at return on the shareholders' investment, but
maximization of ROE in not desirable.
Answer: True
◉ A firm's ROA will equal the firm's ROE if no debt is used as capital.
Answer: True
◉ Upper corporate managers are highly motivated to give their
stockholders an appropriate return on the stock because in the
stockholders start selling the stock, the company's stock price will
decrease and the company can become a takeover target.
Answer: True
,◉ Stock prices have increased significantly since President Trump
was elected due to expectations that the U.S. economy will gain
strength in the future from lower corporate tax rates, repatriation of
corporate cash from abroad, and some deregulation of business.
Answer: True
◉ From World War I to 2000, the economy grew at a an average
growth rate of 3.5 % per year. From 2000 until today, it has grown at
about 1.5% on average per year.
Answer: False
◉ When interest rates are high, an investor should consider buying
bonds and then selling them once interest rates go back down if they
want to make capital gains on bonds.
Answer: True
◉ As U.S. rates go up, the dollar should strengthen and help U.S.
companies that import goods.
Answer: True
◉ The repeal of the Glass Steagall Act of 1933 under President
Clinton's administration has been partially blamed for the 2008-09
crisis.
, Answer: True
◉ In 2015, the U.S. had a trade deficit of about $800 million.
Answer: True
◉ The Volcker Rule has never actually taken affect, even though it's
in the Dodd Frank Bill. It was supposed to keep big banks from
taking on investments that could put the bill in bankruptcy.
Answer: True
◉ When a company buys it's own stock, its P/E ratio is decreased,
thus making its stock price decrease.
Answer: False
◉ The NASDAQ has acquired the Philadelphia Stock Exchange and
25% of the London Stock Exchange.
Answer: True
◉ If a stock's market price is more than the perceived intrinsic value
of the stock, investor demand for purchasing the stock will decrease
and the stock's market price will rise to seek equilibrium.
Answer: False
