BFIN 300 Final Exam Latest Questions
with Correct Answers
What determines stock price? - Answer-Supply and demand
The current price of a security is - Answer-The equilibrium point
Factors of Security Prices - Answer-Interest rate
Inflation
Economic events
A company's financial performance
Industry performance
The principle regulator of the securities market is - Answer-The SEC
The SEC is responsible for - Answer-Licensing security professionals
Enforce securities laws
Provide investors with accurate information
What is the role of investment banks? - Answer-They work with issuers of new
securities in the primary market and find buyers for those securities. They advise the
firm, find the best timing and price for the offer, and sell the shares to the public. They
can also buy the shares themselves.
A dollar in hand today is worth more than a dollar in the future
a)true
b)false - Answer-a)true
Future Value - Answer-Principle x (1+r)^t
Simple Interest - Answer-Interest only earned on the principle
Stock price is the present value of its future cash flows
a)true
b)false - Answer-a)true
Present value of future cash flows is discounted at a
a)interest rate
b)stock price
c)premium
, d)coupoon - Answer-a)interest rate
Present Value - Answer-FV / (1 + r)^n
FV = Future Value
R = Rate of return
N = Number of periods
Most investments have - Answer-Multiple cashflows
Present value is - Answer-Discounted
Future value is - Answer-compounded
Annuity Stream - Answer-A series of constant level cash flows that occur at the end of
each period for a fixed number of periods.
Perpetuity - Answer-An annuity stream that goes on forever
Ex. Preferred shares
Perpetuity Formula - Answer-Cash flow/interest rate
Stated Interest Rate - Answer-Interest rate expressed in the terms of interest payments
make each period
Effective Annual Rate (EAR) - Answer-Interest rate expressed as if it was compounded
once per year
Annual Percentage Rate (APR) - Answer-Rate charged per period multiplied by number
of periods a year
Corporate Finance (most important question) - Answer-Relationship between business
decisions and the value of stock in the business
Financial managers impact - Answer-Capital budgeting, capital structure, working
capital management
Capital Budgeting - Answer-The identification of investment opportunities that are work
more to the business then the cost they require
Capital Structure - Answer-Concerns itself with financing decisions, such as debt and
equity. How much needs to be borrowed? What is the cost of the borrowings? How to
raise that money?
Sole Proprietorship - Answer-A business owned by one person, owner keeps all profits
and endures all liabilities.
with Correct Answers
What determines stock price? - Answer-Supply and demand
The current price of a security is - Answer-The equilibrium point
Factors of Security Prices - Answer-Interest rate
Inflation
Economic events
A company's financial performance
Industry performance
The principle regulator of the securities market is - Answer-The SEC
The SEC is responsible for - Answer-Licensing security professionals
Enforce securities laws
Provide investors with accurate information
What is the role of investment banks? - Answer-They work with issuers of new
securities in the primary market and find buyers for those securities. They advise the
firm, find the best timing and price for the offer, and sell the shares to the public. They
can also buy the shares themselves.
A dollar in hand today is worth more than a dollar in the future
a)true
b)false - Answer-a)true
Future Value - Answer-Principle x (1+r)^t
Simple Interest - Answer-Interest only earned on the principle
Stock price is the present value of its future cash flows
a)true
b)false - Answer-a)true
Present value of future cash flows is discounted at a
a)interest rate
b)stock price
c)premium
, d)coupoon - Answer-a)interest rate
Present Value - Answer-FV / (1 + r)^n
FV = Future Value
R = Rate of return
N = Number of periods
Most investments have - Answer-Multiple cashflows
Present value is - Answer-Discounted
Future value is - Answer-compounded
Annuity Stream - Answer-A series of constant level cash flows that occur at the end of
each period for a fixed number of periods.
Perpetuity - Answer-An annuity stream that goes on forever
Ex. Preferred shares
Perpetuity Formula - Answer-Cash flow/interest rate
Stated Interest Rate - Answer-Interest rate expressed in the terms of interest payments
make each period
Effective Annual Rate (EAR) - Answer-Interest rate expressed as if it was compounded
once per year
Annual Percentage Rate (APR) - Answer-Rate charged per period multiplied by number
of periods a year
Corporate Finance (most important question) - Answer-Relationship between business
decisions and the value of stock in the business
Financial managers impact - Answer-Capital budgeting, capital structure, working
capital management
Capital Budgeting - Answer-The identification of investment opportunities that are work
more to the business then the cost they require
Capital Structure - Answer-Concerns itself with financing decisions, such as debt and
equity. How much needs to be borrowed? What is the cost of the borrowings? How to
raise that money?
Sole Proprietorship - Answer-A business owned by one person, owner keeps all profits
and endures all liabilities.
