FIN 306 FINAL COMPREHENSIVE QUESTIONS
AND COMPLETE SOLUTIONS
◉ When addressing agency problems in the firm, a high salary is
better than stock ownership.
Answer: False
◉ On a balance sheet, Assets = Liabilities + Equity.
Answer: True
◉ Managers can use net income to make interest payments to
bondholders.
Answer: False
◉ The NASDAQ is an example of a secondary market.
Answer: True
◉ If the payment and discount rate are both positive, an ordinary
annuity has a lower present value than an otherwise equivalent
annuity due.
Answer: True
,◉ You computer shareholder wealth as stock price x shares
outstanding.
Answer: True
◉ In its IPO in 2019, Zoom received cash from investors in exchange
for new shares of stock.
Answer: True
◉ The bondholders are the owners of a firm.
Answer: False
◉ The goal of a financial manager is:
a. Maximize cash flow
b. Maximize shareholder wealth
c. Maximize earnings
d. Maximize revenue
Answer: Maximize shareholder wealth
◉ Where do a company's bonds appear on its balance sheet?
a. Short term assets
, b. Liabilities
c. Equity
d. Operations
Answer: Liabilities
◉ Consider a perpetuity with a positive payment and discount rate.
All else equal, what happens to PV if all payments are shifted
forward one year such that the first payment happens today?
a. PV does not change
b. PV increases
c. PV can either increase or decrease
d. PV decreases
Answer: PV increases
◉ If you submit an order through an online broker to purchase 10
shares of Zoom, who would receive the money you pay for the
shares?
a. The previous owner of the shares
b. Zoom
c. Your broker
d. The government
AND COMPLETE SOLUTIONS
◉ When addressing agency problems in the firm, a high salary is
better than stock ownership.
Answer: False
◉ On a balance sheet, Assets = Liabilities + Equity.
Answer: True
◉ Managers can use net income to make interest payments to
bondholders.
Answer: False
◉ The NASDAQ is an example of a secondary market.
Answer: True
◉ If the payment and discount rate are both positive, an ordinary
annuity has a lower present value than an otherwise equivalent
annuity due.
Answer: True
,◉ You computer shareholder wealth as stock price x shares
outstanding.
Answer: True
◉ In its IPO in 2019, Zoom received cash from investors in exchange
for new shares of stock.
Answer: True
◉ The bondholders are the owners of a firm.
Answer: False
◉ The goal of a financial manager is:
a. Maximize cash flow
b. Maximize shareholder wealth
c. Maximize earnings
d. Maximize revenue
Answer: Maximize shareholder wealth
◉ Where do a company's bonds appear on its balance sheet?
a. Short term assets
, b. Liabilities
c. Equity
d. Operations
Answer: Liabilities
◉ Consider a perpetuity with a positive payment and discount rate.
All else equal, what happens to PV if all payments are shifted
forward one year such that the first payment happens today?
a. PV does not change
b. PV increases
c. PV can either increase or decrease
d. PV decreases
Answer: PV increases
◉ If you submit an order through an online broker to purchase 10
shares of Zoom, who would receive the money you pay for the
shares?
a. The previous owner of the shares
b. Zoom
c. Your broker
d. The government
