WGU C214 Verified Multiple Choice and Conceptual Actual
Final Exam Questions With Reviewed 100% Correct
Detailed Answers
Guaranteed Pass!!Current Update
1. What does Beta measure?
a. The default risk of a stock
b. The relative riskiness of an individual stock
c. Indicates the market value of the stock
d. Stocks to avoid purchasing - ANSWER b
2. What is the most effective use of financial statements in valuing a stock?
a. Use the book value of equity on the balance sheet
b. Use GAAP earnnings
c. Use data to estimate future earnings
d. Read the footnotes - ANSWER c
3. If market interest rates rise, what impact does it have on a given bond?
a. Its price decreases
b. It will have a discount price
c. No impact since the coupon rate is fixed
d. Its price increases - ANSWER a
4. What impact did the recent corporate tax cut have on a firm's WACC?
a. It decreased WACC
b. It increased WACC
c. No impact since WACC depend on firm risk
d. None of the above - ANSWER b
,5. Why do firms often use "sensitivity" tests in analyzing investment projects
a. Required by the SEC
b. Uncertainty of forecast assumptions
c. Auditors require it.
d. Required section of financial statements - ANSWER b
6. If debt is less costly than equity, why don't firms maximize debt use?
a. Excessive debt inceases risk of banruptcy
b. Restricted by Federal tax regulations
c. It reduces the benfits of financial leverage
d. It increases operating leverage - ANSWER a
7. Why does a firm's investment opportunities affect it dividend payout ratio?
a. Maximization of shareholder wealth strategy
b. Limited access to market financing
c. Attempts to increase stock price
d. All of the above - ANSWER d
8. If two annuities have the same payments and term, why is an Annuity Due
more valuable than an Ordinary Annuity?
a. The have equal value
b. Annuity Due payments occur earlier
c. Annuity Due uses a lower discount rate
d. Ordinary annuities are consider more risky - ANSWER b
9. What is the impact of rising interest rates on foreign exchange?
a. Makes USD decline in value
, b. Has no impact on USD
c. Increases the value of USD
d. Increases the value of EUR - ANSWER c
10.In cash flow statements, which section reflects so-called "spontaneous"
accounts which vary with sales?
a. Cash flow operations
b. Cash flow investing
c. Cash flow financing
d. Cash flow Sales - ANSWER a
11.What are the practical disadvantages of the Gordon model for equity
valuation?
a. How to use if no dividends are paid
b. Must project dividends "forever" into the future.
c. Does not address the appropriate discount rate
d. All of the above - ANSWER d
12.What factor determines the "market risk premium" on stocks?
a. The level of Treasury yields
b. The investor-perceived riskiness of stocks
c. Seasonality
d. Projected future earnings - ANSWER b
13.Why would a company buy back outstanding stock?
a. To boost the price of the stock
b. To increase financial leverage
c. Lack of investment opportunities
d. All of the above - ANSWER d
, 14.Which factor does NOT affect a firm's WACC?
a. The market risk premium
b. The tax rate
c. Treasury yields
d. The exchange rate - ANSWER d
15.Why should an investor diversify the portfolio?
a. To achieve a better combination of risk and return
b. To avoid putting "all eggs in one basket"
c. Stock returns are a function of systematic risk
d. All of the above - ANSWER d
16.Which statement about a PE ratio is false?
a. High PE ratios reflect higher expected growth rates
b. Low PE stocks are cheap
c. PE is the ratio of price to earnings
d. High Beta stocks have lower PE ratios - ANSWER b
17.If a firm cannot access markets sufficiently to meet their DFN, what
strategies might they use?
a. Slow sales growth
b. Lower dividend payout
c. Increase the net margin
d. All of the above. - ANSWER d
18.Dodd-Frank regulates which segment of the U.S. Economy?
a. Fannie Mae and Freddie Mac (Housing financing)
Final Exam Questions With Reviewed 100% Correct
Detailed Answers
Guaranteed Pass!!Current Update
1. What does Beta measure?
a. The default risk of a stock
b. The relative riskiness of an individual stock
c. Indicates the market value of the stock
d. Stocks to avoid purchasing - ANSWER b
2. What is the most effective use of financial statements in valuing a stock?
a. Use the book value of equity on the balance sheet
b. Use GAAP earnnings
c. Use data to estimate future earnings
d. Read the footnotes - ANSWER c
3. If market interest rates rise, what impact does it have on a given bond?
a. Its price decreases
b. It will have a discount price
c. No impact since the coupon rate is fixed
d. Its price increases - ANSWER a
4. What impact did the recent corporate tax cut have on a firm's WACC?
a. It decreased WACC
b. It increased WACC
c. No impact since WACC depend on firm risk
d. None of the above - ANSWER b
,5. Why do firms often use "sensitivity" tests in analyzing investment projects
a. Required by the SEC
b. Uncertainty of forecast assumptions
c. Auditors require it.
d. Required section of financial statements - ANSWER b
6. If debt is less costly than equity, why don't firms maximize debt use?
a. Excessive debt inceases risk of banruptcy
b. Restricted by Federal tax regulations
c. It reduces the benfits of financial leverage
d. It increases operating leverage - ANSWER a
7. Why does a firm's investment opportunities affect it dividend payout ratio?
a. Maximization of shareholder wealth strategy
b. Limited access to market financing
c. Attempts to increase stock price
d. All of the above - ANSWER d
8. If two annuities have the same payments and term, why is an Annuity Due
more valuable than an Ordinary Annuity?
a. The have equal value
b. Annuity Due payments occur earlier
c. Annuity Due uses a lower discount rate
d. Ordinary annuities are consider more risky - ANSWER b
9. What is the impact of rising interest rates on foreign exchange?
a. Makes USD decline in value
, b. Has no impact on USD
c. Increases the value of USD
d. Increases the value of EUR - ANSWER c
10.In cash flow statements, which section reflects so-called "spontaneous"
accounts which vary with sales?
a. Cash flow operations
b. Cash flow investing
c. Cash flow financing
d. Cash flow Sales - ANSWER a
11.What are the practical disadvantages of the Gordon model for equity
valuation?
a. How to use if no dividends are paid
b. Must project dividends "forever" into the future.
c. Does not address the appropriate discount rate
d. All of the above - ANSWER d
12.What factor determines the "market risk premium" on stocks?
a. The level of Treasury yields
b. The investor-perceived riskiness of stocks
c. Seasonality
d. Projected future earnings - ANSWER b
13.Why would a company buy back outstanding stock?
a. To boost the price of the stock
b. To increase financial leverage
c. Lack of investment opportunities
d. All of the above - ANSWER d
, 14.Which factor does NOT affect a firm's WACC?
a. The market risk premium
b. The tax rate
c. Treasury yields
d. The exchange rate - ANSWER d
15.Why should an investor diversify the portfolio?
a. To achieve a better combination of risk and return
b. To avoid putting "all eggs in one basket"
c. Stock returns are a function of systematic risk
d. All of the above - ANSWER d
16.Which statement about a PE ratio is false?
a. High PE ratios reflect higher expected growth rates
b. Low PE stocks are cheap
c. PE is the ratio of price to earnings
d. High Beta stocks have lower PE ratios - ANSWER b
17.If a firm cannot access markets sufficiently to meet their DFN, what
strategies might they use?
a. Slow sales growth
b. Lower dividend payout
c. Increase the net margin
d. All of the above. - ANSWER d
18.Dodd-Frank regulates which segment of the U.S. Economy?
a. Fannie Mae and Freddie Mac (Housing financing)
