COBA CORE FIN3430 EXAM
COBA CORE FIN3430 EXAM QUESTIONS AND
ANSWERS GRADED A+
Global companies that deal with the political and financial risks of
conducting business in a particular foreign location face which of the
following types of risk:
country risk
principal risk
interest rate risk
commodity price risk ANS >> country risk
At the beginning of Year 1, 100,000 is invested at 5% interest
compounded annually. What amount of interest is earned in Year 2?
$5000
$5512.50
$5250
$10,000 ANS >> 5250.00
,COBA CORE FIN3430 EXAM
The risk of loss because of fluctuations in the relative value of foreign
currencies is called
a) expropriation risk
b) multinational beta
c)exchange rate risk
d) undiversifiable risk ANS >> exchange rate risk
. Beginning January 2, Year 1, a company deposited $50,000 in a savings
account for 2 years. The account earns 10% interest, compounded
annually. What amount of interest did the company earn during the 2-
year period?
$10,500
$10,000
$5,500
$5000 ANS >> $10,500
One type of risk to which investment securities are subject can be offset
through portfolio diversification. This type of risk is referred to as
A. Market risk.
B. Undiversifiable risk.
C. Liquidity risk.
D. Company unique risk. ANS >> Company unique risk
,COBA CORE FIN3430 EXAM
When purchasing temporary investments, which one of the following
best describes the risk associated with the ability to sell the investment
in a short period of time without significant price concessions?
A. Interest-rate risk.
B. Purchasing-power risk.
C. Financial risk.
D. Liquidity risk. ANS >> Liquidity risk
prior to the introduction of the euro, O&B Company, a U.S corporation,
is in possession of accounts receivable denominated in Deutsche marks.
To what type of risk are they exposed?
A. Liquidity risk.
B. Political risk.
C. Exchange-rate risk.
D. Price risk. ANS >> Exchange-rate risk
An investment security with high risk will have a
A. Low expected return.
B. Lower price than an asset with low risk.
C. Lower coefficient of variation.
D. High standard deviation of returns. ANS >> High standard deviation
of returns
, COBA CORE FIN3430 EXAM
The following information pertains to a company's potential investment
in security X:
Maturity risk premium 1%
Liquidity risk premium 3%
Default risk premium 2%
Risk-free rate 4%
What is the company's required rate of return for the investment in this
security?
A. 4%
B. 6%
C. 9%
D. 10% ANS >> 10%
Which of the following classes of securities are listed in order from
lowest risk/opportunity for return to the highest risk/opportunity for
return?
A. U.S. Treasury bonds; corporate first mortgage bonds; corporate
income bonds; preferred stock.
B. Corporate income bonds; corporate mortgage bonds; convertible
preferred stock; subordinated debentures.
C. Common stock; corporate first mortgage bonds; corporate second
mortgage bonds; corporate income bonds.
COBA CORE FIN3430 EXAM QUESTIONS AND
ANSWERS GRADED A+
Global companies that deal with the political and financial risks of
conducting business in a particular foreign location face which of the
following types of risk:
country risk
principal risk
interest rate risk
commodity price risk ANS >> country risk
At the beginning of Year 1, 100,000 is invested at 5% interest
compounded annually. What amount of interest is earned in Year 2?
$5000
$5512.50
$5250
$10,000 ANS >> 5250.00
,COBA CORE FIN3430 EXAM
The risk of loss because of fluctuations in the relative value of foreign
currencies is called
a) expropriation risk
b) multinational beta
c)exchange rate risk
d) undiversifiable risk ANS >> exchange rate risk
. Beginning January 2, Year 1, a company deposited $50,000 in a savings
account for 2 years. The account earns 10% interest, compounded
annually. What amount of interest did the company earn during the 2-
year period?
$10,500
$10,000
$5,500
$5000 ANS >> $10,500
One type of risk to which investment securities are subject can be offset
through portfolio diversification. This type of risk is referred to as
A. Market risk.
B. Undiversifiable risk.
C. Liquidity risk.
D. Company unique risk. ANS >> Company unique risk
,COBA CORE FIN3430 EXAM
When purchasing temporary investments, which one of the following
best describes the risk associated with the ability to sell the investment
in a short period of time without significant price concessions?
A. Interest-rate risk.
B. Purchasing-power risk.
C. Financial risk.
D. Liquidity risk. ANS >> Liquidity risk
prior to the introduction of the euro, O&B Company, a U.S corporation,
is in possession of accounts receivable denominated in Deutsche marks.
To what type of risk are they exposed?
A. Liquidity risk.
B. Political risk.
C. Exchange-rate risk.
D. Price risk. ANS >> Exchange-rate risk
An investment security with high risk will have a
A. Low expected return.
B. Lower price than an asset with low risk.
C. Lower coefficient of variation.
D. High standard deviation of returns. ANS >> High standard deviation
of returns
, COBA CORE FIN3430 EXAM
The following information pertains to a company's potential investment
in security X:
Maturity risk premium 1%
Liquidity risk premium 3%
Default risk premium 2%
Risk-free rate 4%
What is the company's required rate of return for the investment in this
security?
A. 4%
B. 6%
C. 9%
D. 10% ANS >> 10%
Which of the following classes of securities are listed in order from
lowest risk/opportunity for return to the highest risk/opportunity for
return?
A. U.S. Treasury bonds; corporate first mortgage bonds; corporate
income bonds; preferred stock.
B. Corporate income bonds; corporate mortgage bonds; convertible
preferred stock; subordinated debentures.
C. Common stock; corporate first mortgage bonds; corporate second
mortgage bonds; corporate income bonds.
