FIN 100 Final Milestone

21/25 that's 84%
RETAKE
21 questions were answered correctly.
4 questions were answered incorrectly.
1
Lennon owns 50 shares of stock in Company A that are valued at
$10/share.

After Company A splits their stock at 2-for-1, what does Lennon own?


50 shares valued at $10/share


50 shares valued at $20/share


100 shares valued at $10/share


100 shares valued at $5/share

RATIONALE
At 2-for-1, the number of shares doubles from 50 shares to 100 shares, and the share
price is cut in half from $10/share to $5/share.
CONCEPT
Cash Dividend Alternatives
2
One reason a company may choose to issue additional debt instead of
equity when raising capital is that __________.


the company will be less leveraged



, debt interest payments are tax-deductible


equity increases volatility


too much equity raises the risk of bankruptcy

RATIONALE
This is one benefit of the additional leverage.
CONCEPT
Capital Structure Considerations
3
Nadia is going to receive $1,000 from her grandparents next year.

According to the time value of money, the gift of $1,000 is worth
__________ a gift of $1,000 if she received it today.


the same as


more than


twice as much as


less than

RATIONALE
It would be less than due to the time value of money.
CONCEPT
Introduction to the Time Value of Money
4

A corporation that makes shares of stock available for the public to
purchase is an example of an __________.


investment trust