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Finance 450 KSU exam 1 Questions And Answers
Verified 100% Correct!!
The primary goal of a publicly-owned firm interested in serving its stockholders
should be to
A. maximize the company's profit this year
B. maximize expected earnings per share
C. maximize the stock price per share
D. maximize expected net income - (answers)D. maximize the stock price per
share
A company regularly paying bills on time is an example of
A. capital budgeting
B. capital financing
C. working capital management
D. risk management
E. an agency problem - (answers)C. working capital management
Which of these best represents the "buy side" of the investment world?
A. investment banks
B. corporations
C. commercial banks
D. US government
E. mutual funds - (answers)E. mutual funds
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Assuming positive rates of return, if you have a choice between $500 a quarter for
a year or $2000 one year from now you should choose
A. the quarterly payments because they have a higher future value
B. the lump sum because it has a higher present value
C. you would be indifferent between the two
D. the quarterly payments because they have a lower present value
E. the answer would depend on if the payments are at the beginning or end of the
quarter - (answers)A. the quarterly payments because they have a higher future
value
True or False
All publicly traded corporations have agency costs - (answers)True
True or False
All else the same, an increase in the number of payments would cause the
present value of an annuity to increase - (answers)True
True or False
All else the same, effective annual rates increase as compounding frequency
increases - (answers)True
True or False
All else the same, present values increase as discounting frequency increases -
(answers)False
True or False
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All else held constant, an annuity due payment would need to be more than an
ordinary annuity to pay off a given present value debt - (answers)False
Moe tells Larry that his company is acquiring a smaller company and that Larry
should buy shares in the smaller company now as its price will increase when this
information becomes public. Curly, who doesn't know Moe or Larry, overhears
this conversation in a public place and decides to buy the smaller company's
stock. Larry also buys the smaller company's as well. Who all broke the insider
trading law as established by the Securities Exchange Act of 1934?
A. Moe only
B. Larry only
C. Larry and Curly only
D. Moe and Larry only
E. Moe, Larry and Curly - (answers)D. Moe and Larry only
Which of these is a working capital decision?
A. making sure you have enough inventory for the next six months
B. issuing new stock
C. deciding whether or not to introduce a new product
D. deciding whether or not to build a new manufacturing plant
E. deciding whether or not to borrow money long term - (answers)A. making sure
you have enough inventory for the next six months
The primary goal of a publicly-owned firm interested in serving its stockholders
should be to
A. minimize the debt used by the firm
Finance 450 KSU exam 1 Questions And Answers
Verified 100% Correct!!
The primary goal of a publicly-owned firm interested in serving its stockholders
should be to
A. maximize the company's profit this year
B. maximize expected earnings per share
C. maximize the stock price per share
D. maximize expected net income - (answers)D. maximize the stock price per
share
A company regularly paying bills on time is an example of
A. capital budgeting
B. capital financing
C. working capital management
D. risk management
E. an agency problem - (answers)C. working capital management
Which of these best represents the "buy side" of the investment world?
A. investment banks
B. corporations
C. commercial banks
D. US government
E. mutual funds - (answers)E. mutual funds
,2|Page
Assuming positive rates of return, if you have a choice between $500 a quarter for
a year or $2000 one year from now you should choose
A. the quarterly payments because they have a higher future value
B. the lump sum because it has a higher present value
C. you would be indifferent between the two
D. the quarterly payments because they have a lower present value
E. the answer would depend on if the payments are at the beginning or end of the
quarter - (answers)A. the quarterly payments because they have a higher future
value
True or False
All publicly traded corporations have agency costs - (answers)True
True or False
All else the same, an increase in the number of payments would cause the
present value of an annuity to increase - (answers)True
True or False
All else the same, effective annual rates increase as compounding frequency
increases - (answers)True
True or False
All else the same, present values increase as discounting frequency increases -
(answers)False
True or False
, 3|Page
All else held constant, an annuity due payment would need to be more than an
ordinary annuity to pay off a given present value debt - (answers)False
Moe tells Larry that his company is acquiring a smaller company and that Larry
should buy shares in the smaller company now as its price will increase when this
information becomes public. Curly, who doesn't know Moe or Larry, overhears
this conversation in a public place and decides to buy the smaller company's
stock. Larry also buys the smaller company's as well. Who all broke the insider
trading law as established by the Securities Exchange Act of 1934?
A. Moe only
B. Larry only
C. Larry and Curly only
D. Moe and Larry only
E. Moe, Larry and Curly - (answers)D. Moe and Larry only
Which of these is a working capital decision?
A. making sure you have enough inventory for the next six months
B. issuing new stock
C. deciding whether or not to introduce a new product
D. deciding whether or not to build a new manufacturing plant
E. deciding whether or not to borrow money long term - (answers)A. making sure
you have enough inventory for the next six months
The primary goal of a publicly-owned firm interested in serving its stockholders
should be to
A. minimize the debt used by the firm
