FIN 310 KU Exam 2 UPDATED ACTUAL Questions And Correct Answers
C
Terms in this set (20)
An agent who buys and sells securities from inventory is B. Dealer
called a:
A. Specialist
B. Dealer
C. Broker
D. Floor Trader
Which of the following statements is FALSE? C. In the stock market, the secondary market is the market where new securities
A. The bid price is the price that a dealer is willing to pay are originally sold to investors by the issuing company.
for a security and is lower than the ask price.
B. Bonds trade less frequently than stocks.
C. In the stock market, the secondary market is the
market where new securities are originally sold to
investors by the issuing company.
D. Dividends received by corporations have a 70% to
100% exclusion from taxable income.
Which of the following statements is FALSE? B. The primary advantage to payback analysis is that it biases companies to invest
A. The internal rate of return is defined as the discount in long-term
rate which results in a zero net present value for projects that require large current expenditures on research and development.
the project.
B. The primary advantage to payback analysis is that it
biases companies to invest in long-term projects that
require large current expenditures on research and
development.
C. The average accounting return ignores cash flows is
most similar to computing the return on assets
(ROA).
D. The profitability index reflects the value created per
dollar invested.
Which of the following statements is FALSE? A. Sensitivity analysis helps determine the reasonable range of expectations for a
A. Sensitivity analysis helps determine the reasonable project's outcome.
range of expectations for a project's outcome.
B. The impacts of estimation errors and forecasting risks
are small when NPVs are large and negative.
C. Under intense competition, positive NPV projects are
rare.
D. The error of commission, or Type 1 error NPV
estimation, is the risk that a project will be accepted
when its true NPV is negative.
, Which of the following statements is TRUE? D. Managerial real options can be very valuable but difficult to measure, and
A. Opportunity costs are those values that have already ignoring them will
been incurred, cannot be recouped, and should underestimate a project's true Net Present Value.
not be considered in an investment decision.
B. The stand-alone principle requires analysts to evaluate
a project based on its stand-alone cash flows
without reference to how it might impact the firm's
incremental cash flows.
C. Under hard capital rationing, a business enforces limits
on investment budgets because it prefers not
to raise financing from the capital markets.
D. Managerial real options can be very valuable but
difficult to measure, and ignoring them will
underestimate a project's true Net Present Value.
Which of the following statements is FALSE? D. Like the dividend yield, the capital gains yield can never be negative.
A. Over the long run, investments in small-company
stocks have had the largest return but also the
most risk, when compared with large-company stocks,
bonds, and T-Bills.
B. The average return is always greater than the
geometric return.
C. Investors who hold bonds instead of stocks over long
horizons can be rational and relatively averse
to risk.
D. Like the dividend yield, the capital gains yield can
never be negative.
Which of the following statements is TRUE? D. If markets are semi-strong form efficient, then all publicly available information
A. Efficient markets protect investors from wrong choices is reflected in stock prices and fundamental analysis is useless.
even if they do not diversify.
B. Consistent with efficient markets, stock prices reach
equilibrium several times per hour.
C. Efficient markets react to new information by partially
and slowly adjusting the price of a stock to
its new fair market value with a delay since it takes a while
for everyone to agree.
D. If markets are semi-strong form efficient, then all
publicly available information is reflected in stock
prices and fundamental analysis is useless.
Which of the following statements is FALSE? D. Only asset-specific risks, not market-wide risks, should earn rewards
A. Asset-specific risks can be diversified in a portfolio of
imperfectly correlated assets
B. Asset-specific risks can be diversified with numerous
assets in a portfolio
C. Bearing risk is rewarded with higher expected returns
D. Only asset-specific risks, not market-wide risks, should
earn rewards
C
Terms in this set (20)
An agent who buys and sells securities from inventory is B. Dealer
called a:
A. Specialist
B. Dealer
C. Broker
D. Floor Trader
Which of the following statements is FALSE? C. In the stock market, the secondary market is the market where new securities
A. The bid price is the price that a dealer is willing to pay are originally sold to investors by the issuing company.
for a security and is lower than the ask price.
B. Bonds trade less frequently than stocks.
C. In the stock market, the secondary market is the
market where new securities are originally sold to
investors by the issuing company.
D. Dividends received by corporations have a 70% to
100% exclusion from taxable income.
Which of the following statements is FALSE? B. The primary advantage to payback analysis is that it biases companies to invest
A. The internal rate of return is defined as the discount in long-term
rate which results in a zero net present value for projects that require large current expenditures on research and development.
the project.
B. The primary advantage to payback analysis is that it
biases companies to invest in long-term projects that
require large current expenditures on research and
development.
C. The average accounting return ignores cash flows is
most similar to computing the return on assets
(ROA).
D. The profitability index reflects the value created per
dollar invested.
Which of the following statements is FALSE? A. Sensitivity analysis helps determine the reasonable range of expectations for a
A. Sensitivity analysis helps determine the reasonable project's outcome.
range of expectations for a project's outcome.
B. The impacts of estimation errors and forecasting risks
are small when NPVs are large and negative.
C. Under intense competition, positive NPV projects are
rare.
D. The error of commission, or Type 1 error NPV
estimation, is the risk that a project will be accepted
when its true NPV is negative.
, Which of the following statements is TRUE? D. Managerial real options can be very valuable but difficult to measure, and
A. Opportunity costs are those values that have already ignoring them will
been incurred, cannot be recouped, and should underestimate a project's true Net Present Value.
not be considered in an investment decision.
B. The stand-alone principle requires analysts to evaluate
a project based on its stand-alone cash flows
without reference to how it might impact the firm's
incremental cash flows.
C. Under hard capital rationing, a business enforces limits
on investment budgets because it prefers not
to raise financing from the capital markets.
D. Managerial real options can be very valuable but
difficult to measure, and ignoring them will
underestimate a project's true Net Present Value.
Which of the following statements is FALSE? D. Like the dividend yield, the capital gains yield can never be negative.
A. Over the long run, investments in small-company
stocks have had the largest return but also the
most risk, when compared with large-company stocks,
bonds, and T-Bills.
B. The average return is always greater than the
geometric return.
C. Investors who hold bonds instead of stocks over long
horizons can be rational and relatively averse
to risk.
D. Like the dividend yield, the capital gains yield can
never be negative.
Which of the following statements is TRUE? D. If markets are semi-strong form efficient, then all publicly available information
A. Efficient markets protect investors from wrong choices is reflected in stock prices and fundamental analysis is useless.
even if they do not diversify.
B. Consistent with efficient markets, stock prices reach
equilibrium several times per hour.
C. Efficient markets react to new information by partially
and slowly adjusting the price of a stock to
its new fair market value with a delay since it takes a while
for everyone to agree.
D. If markets are semi-strong form efficient, then all
publicly available information is reflected in stock
prices and fundamental analysis is useless.
Which of the following statements is FALSE? D. Only asset-specific risks, not market-wide risks, should earn rewards
A. Asset-specific risks can be diversified in a portfolio of
imperfectly correlated assets
B. Asset-specific risks can be diversified with numerous
assets in a portfolio
C. Bearing risk is rewarded with higher expected returns
D. Only asset-specific risks, not market-wide risks, should
earn rewards
