Corporate Finance Foundations Exam Questions
Correctly Solved
What is the implication of a low value of beta? - Answer Insensitivity to the broad market
How would you best define the concept of capital structure in finance? - Answer The mix of dealt and
owner investment
If Astra Containers became a publicly-traded company, it could more easily raise capital. What would be
the disadvantages? - Answer Increased regulation, loss of control and shorter time horizons
How are risk and return related? - Answer Lower risk implies low return, and high return implies high
risk
Finance is sometimes considered the process of borrowing money to pay for something. Which broader
activities best define the scope of finance? - Answer Deciding what to buy and how to manage it.
The public debt of Astra Containers would be held in _____ bonds. - Answer Corporate
Which type of payment is most easily adjusted to accommodate circumstances?Divident - Answer
Divident
Thierry owns stock in two companies in the United States. The first has a beta of 0.73, and the second
has a beta of 1.48. What is the difference in expected rates of return for the two companies? - Answer
4.5 percent
Why do equity investors require a higher return than lenders? - Answer Lenders are protected by law.
From the discussion of the definition of beta, identify the market category that would have the highest
beta. - Answer Luxury goods
Correctly Solved
What is the implication of a low value of beta? - Answer Insensitivity to the broad market
How would you best define the concept of capital structure in finance? - Answer The mix of dealt and
owner investment
If Astra Containers became a publicly-traded company, it could more easily raise capital. What would be
the disadvantages? - Answer Increased regulation, loss of control and shorter time horizons
How are risk and return related? - Answer Lower risk implies low return, and high return implies high
risk
Finance is sometimes considered the process of borrowing money to pay for something. Which broader
activities best define the scope of finance? - Answer Deciding what to buy and how to manage it.
The public debt of Astra Containers would be held in _____ bonds. - Answer Corporate
Which type of payment is most easily adjusted to accommodate circumstances?Divident - Answer
Divident
Thierry owns stock in two companies in the United States. The first has a beta of 0.73, and the second
has a beta of 1.48. What is the difference in expected rates of return for the two companies? - Answer
4.5 percent
Why do equity investors require a higher return than lenders? - Answer Lenders are protected by law.
From the discussion of the definition of beta, identify the market category that would have the highest
beta. - Answer Luxury goods
