FINA 3000 Pope Final (Concept) questions and solutions

FINA 3000 Pope Final (Concept) questions and
solutions

A key advantage of a corporation is that investors have limited liability. - answersTRUE
ji ji ji ji ji ji ji ji ji ji ji ji ji




Alpha Incorporated has slow moving inventory. An analyst would likely put more weight on the current ratio
ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji




than the quick ratio in evaluating their ability to make short-term payments. - answersFALSE
ji ji ji ji ji ji ji ji ji ji ji ji ji ji




A contract offers $100 per year for 6 years. The present value of the $100 paid in year 1 is equal to the present
ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji




value of the $100 paid in year 5 if the interest rate is positive. - answersFALSE
ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji




In 2018, the gross profit margin for Zach's Chicken was 40%, while in 2019, the gross profit margin is now 36%
ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji




for the company. We can say that gross profit margin has declined for the company. - answersTRUE
ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji




A bond's rating is upgraded from BBB to A. This means that the yield to maturity (YTM) on the bond will likely
ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji




decrease as a result. - answersTRUE
ji ji ji ji ji ji




A major weakness of the finite stock pricing model is that we assume a future selling price. - answersTrue
ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji




In general, we can say that debt issued by a firm has less risk than stock trading for the same firm. So, we would
ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji




need a smaller return for the debt than the firm's equity. - answersTRUE
ji ji ji ji ji ji ji ji ji ji ji ji ji




For a short term investor, a bond's yield to maturity is more important that the bond's current yield. -
ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji




answersFALSE
ji




If we compound more than once a year, the EAR will always be greater than the APR if the APR is positive. -
ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji




answersTRUE
ji




A perpetuity is an annuity that has no maturity date. - answersTRUE
ji ji ji ji ji ji ji ji ji ji ji




With an amortized loan, the amount of principal reduction decreases with each payment. - answersFALSE
ji ji ji ji ji ji ji ji ji ji ji ji ji ji




The future value of a cash flow stream increases if you increase the interest rate. - answersTRUE
ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji




If we increase the interest rate, the present value of an investment increases. (all else equal) - answersFALSE
ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji




A large disadvantage of the sole proprietorship form of business is that it is difficult to raise capital. -
ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji




answersTRUE
ji




The balance of an amortized loan is future value of the remaining payments. - answersFALSE
ji ji ji ji ji ji ji ji ji ji ji ji ji ji




An investment will pay $4,000 at the end of the next month. Each payment will be 4% bigger than the previous
ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji




month's payment and the investment will last forever. To value this opportunity today, which formula should
ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji




we use: - answersPresent value of a growing perpetuity
ji ji ji ji ji ji ji ji ji