FIN 305 WEEK 7 FINAL PART A ACTUAL
EXAM PAPER 2026 QUESTIONS WITH
ANSWERS GRADED A+
◍ To trace cash flows through the firms operations, we must measure which of
the following? (it is the time necessary to acquire raw materials, turn them
into finished goods, sell them, and receive payment for them) A) operation
cycle B) cash cycle C) transaction cycle D) production cycle.
Answer: A -Slide 2, Ch. 14
◍ Time value of money concepts can be used by: A) CFO's and CEOs to make
business decisions B) investors calculating a return on investment C)
Individuals doing personal business decisions D) All of these are users of
time value of money concepts.
Answer: D -Slide 1, Ch. 4
◍ Bond Equivalent Yields and EARs are fair ways to compare
yields.However, they are not the classic way to report money market
yields.Prior to computers, conventions arose which are still in place:.
Answer: ▪ Day counting convention: reported yields are calculated as if
there are 360days per year (rather than 365 days).▪ As we'll see, discount
yields use face value in the denominator (bc it's a roundnumber) where a
true yield would use the price (not typically a round number).
◍ Debt management ratios measure the leverage of a firm. Higher leverage
means the following: A) high debt use and higher risk B) higher debt use
and lower risk C) lower debt use and lower risk D) lower debt use, which is
good compared to other firms.
Answer: A-Discussion on slides 9-10, CH. 3
◍ long-term bonds issued by state and localgovernments.
, Answer: state and local govt bonds
◍ is a security issued by a federal government department (other than the US
Treasury) or by a government sponsored enterprise.
Answer: agency bond
◍ _________ are bought and sold on a discount basis. They are quoted in
terms of the discount yield ( )..
Answer: T-bills and CPs
◍ The________- for an IPO is the percentage change from the offer price to
the first-day close.▪ Because this______ is, on average, positive, IPOs are
said to be underpriced relative to the market clearing price. (Less true for
SEOs).
Answer: initial return
◍ ▪ If the securitization is based on the pool of consumer credit (other than
mortgages), the resulting securities are called __________▪ Taking a step
further, any debt obligations can be included in the pool ofassets such as
corporate loans, bonds, and even other securitized products.
Answer: asset-backed securities (ABSs).
◍ EXAM 3.
Answer: questions
◍ which of the following activities results in an increase in a firm's cash?A)
decrease fixed assets B) decrease accounts payable C) pay dividends D)
repurchase of common stock.
Answer: A -Slide 1, Chp. 14
◍ Which of the following does NOT describes why firms produce financial
statements?A) to use as a tool when planning future investments within the
firm B) to provide a means of enticing new investors to a firm C) to provide
interested parties, both inside and outside the company, with an overview of
the short and long-term financial conditions of a business. D) to show what
activities the company has undertaken in the previous financial year, and
what activities are planned for the near future.
, Answer: B-Slide 2, Chp. 3
◍ Stock valuation model dynamics make clear that lower discount rates lead
to: A) lower valuations B) higher valuations C) lower growth rates D)
higher growth rates.
Answer: B-Slide 15, chapter 8
◍ You want to purchase 100 shares of Apple stock. The ask price is $118.35
and the bid price is $118.29. How much will you pay per share? A) $118.29
B) $118.32C) $118.35 D) cannot determine from the information given.
Answer: C -slide 5, chapter 8 -the ask price is the investors buying price
◍ EXAM 1.
Answer: Questions
◍ T-bills are bought and sold on a.
Answer: discount basis
◍ is an entity that acts as an intermediary in a trade by buying and selling for
its own account.
Answer: dealer
◍ issuing/trading securities of entities domiciled outside the country.
Answer: foreign internal market
◍ Mortgages that are not federally insured.▪ Private mortgage insurance (PMI)
is generally required when the LTV ratio ismore than 80% (i.e., the
borrower makes a less than 20% down payment)..
Answer: Conventional mortgages
◍ U.
S. markets are the world's largest, but international markets have seen rapid
growth in recent years as a result of various factors:.
Answer: 1. Pool of savings in foreign countries has increased2. International
investors have turned to U.S. and other markets to expand theirinvestment
opportunities3. Information on foreign investments and markets is now
more accessible andthorough. Transaction costs have also decreased.4.
, Economic growth in Pacific Basin countries, China, and other
emergingcountries has resulted in significant growth in their stock
markets.5. Deregulation in many foreign countries has allowed international
investors greater access and allowed the deregulating countries to expand
their investor base
◍ the value of the time spent in locating a counterparty.
Answer: implicit search costs
◍ The Federal Reserve buys and sells _______ to implement monetary
policies.▪ Strong international demand for T-bills as a safe haven
investment..
Answer: T-bills
◍ three economic functions of financial markets.
Answer: 1. The interactions of buyers and sellers in a financial market
determine theprice of a traded asset2. Financial markets provide a
mechanism for an investor to sell a financial asset (i.e., offer liquidity).3.
Financial markets reduce the search and information costs of transaction.
◍ T-bills and Commercial Paper.▪ These securities are quoted in terms of the
Discount-yield (definition coming)..
Answer: discount securities
◍ Money market instruments.
Answer: 1. Treasury bills (T-bills)2. Federal funds (Fed funds)3. Repurchase
agreements (repos or RPs)4. Negotiable certificates of deposit (CDs)5.
Commercial papers (CPs)
◍ Maximizing owners equity value means carefully considering all of the
following EXCEPT: A) how best to bring additional funds into the firms B)
which projects to invest in C) how best to increase the firms risk D) how
best to return the profits form the firms projects to the owners over time.
Answer: C -Slide 9, Chp. 1
◍ The firm's debt payments are a ____ cost of financing.Increasing a firm's
financial leverage makes its equity riskier!.
EXAM PAPER 2026 QUESTIONS WITH
ANSWERS GRADED A+
◍ To trace cash flows through the firms operations, we must measure which of
the following? (it is the time necessary to acquire raw materials, turn them
into finished goods, sell them, and receive payment for them) A) operation
cycle B) cash cycle C) transaction cycle D) production cycle.
Answer: A -Slide 2, Ch. 14
◍ Time value of money concepts can be used by: A) CFO's and CEOs to make
business decisions B) investors calculating a return on investment C)
Individuals doing personal business decisions D) All of these are users of
time value of money concepts.
Answer: D -Slide 1, Ch. 4
◍ Bond Equivalent Yields and EARs are fair ways to compare
yields.However, they are not the classic way to report money market
yields.Prior to computers, conventions arose which are still in place:.
Answer: ▪ Day counting convention: reported yields are calculated as if
there are 360days per year (rather than 365 days).▪ As we'll see, discount
yields use face value in the denominator (bc it's a roundnumber) where a
true yield would use the price (not typically a round number).
◍ Debt management ratios measure the leverage of a firm. Higher leverage
means the following: A) high debt use and higher risk B) higher debt use
and lower risk C) lower debt use and lower risk D) lower debt use, which is
good compared to other firms.
Answer: A-Discussion on slides 9-10, CH. 3
◍ long-term bonds issued by state and localgovernments.
, Answer: state and local govt bonds
◍ is a security issued by a federal government department (other than the US
Treasury) or by a government sponsored enterprise.
Answer: agency bond
◍ _________ are bought and sold on a discount basis. They are quoted in
terms of the discount yield ( )..
Answer: T-bills and CPs
◍ The________- for an IPO is the percentage change from the offer price to
the first-day close.▪ Because this______ is, on average, positive, IPOs are
said to be underpriced relative to the market clearing price. (Less true for
SEOs).
Answer: initial return
◍ ▪ If the securitization is based on the pool of consumer credit (other than
mortgages), the resulting securities are called __________▪ Taking a step
further, any debt obligations can be included in the pool ofassets such as
corporate loans, bonds, and even other securitized products.
Answer: asset-backed securities (ABSs).
◍ EXAM 3.
Answer: questions
◍ which of the following activities results in an increase in a firm's cash?A)
decrease fixed assets B) decrease accounts payable C) pay dividends D)
repurchase of common stock.
Answer: A -Slide 1, Chp. 14
◍ Which of the following does NOT describes why firms produce financial
statements?A) to use as a tool when planning future investments within the
firm B) to provide a means of enticing new investors to a firm C) to provide
interested parties, both inside and outside the company, with an overview of
the short and long-term financial conditions of a business. D) to show what
activities the company has undertaken in the previous financial year, and
what activities are planned for the near future.
, Answer: B-Slide 2, Chp. 3
◍ Stock valuation model dynamics make clear that lower discount rates lead
to: A) lower valuations B) higher valuations C) lower growth rates D)
higher growth rates.
Answer: B-Slide 15, chapter 8
◍ You want to purchase 100 shares of Apple stock. The ask price is $118.35
and the bid price is $118.29. How much will you pay per share? A) $118.29
B) $118.32C) $118.35 D) cannot determine from the information given.
Answer: C -slide 5, chapter 8 -the ask price is the investors buying price
◍ EXAM 1.
Answer: Questions
◍ T-bills are bought and sold on a.
Answer: discount basis
◍ is an entity that acts as an intermediary in a trade by buying and selling for
its own account.
Answer: dealer
◍ issuing/trading securities of entities domiciled outside the country.
Answer: foreign internal market
◍ Mortgages that are not federally insured.▪ Private mortgage insurance (PMI)
is generally required when the LTV ratio ismore than 80% (i.e., the
borrower makes a less than 20% down payment)..
Answer: Conventional mortgages
◍ U.
S. markets are the world's largest, but international markets have seen rapid
growth in recent years as a result of various factors:.
Answer: 1. Pool of savings in foreign countries has increased2. International
investors have turned to U.S. and other markets to expand theirinvestment
opportunities3. Information on foreign investments and markets is now
more accessible andthorough. Transaction costs have also decreased.4.
, Economic growth in Pacific Basin countries, China, and other
emergingcountries has resulted in significant growth in their stock
markets.5. Deregulation in many foreign countries has allowed international
investors greater access and allowed the deregulating countries to expand
their investor base
◍ the value of the time spent in locating a counterparty.
Answer: implicit search costs
◍ The Federal Reserve buys and sells _______ to implement monetary
policies.▪ Strong international demand for T-bills as a safe haven
investment..
Answer: T-bills
◍ three economic functions of financial markets.
Answer: 1. The interactions of buyers and sellers in a financial market
determine theprice of a traded asset2. Financial markets provide a
mechanism for an investor to sell a financial asset (i.e., offer liquidity).3.
Financial markets reduce the search and information costs of transaction.
◍ T-bills and Commercial Paper.▪ These securities are quoted in terms of the
Discount-yield (definition coming)..
Answer: discount securities
◍ Money market instruments.
Answer: 1. Treasury bills (T-bills)2. Federal funds (Fed funds)3. Repurchase
agreements (repos or RPs)4. Negotiable certificates of deposit (CDs)5.
Commercial papers (CPs)
◍ Maximizing owners equity value means carefully considering all of the
following EXCEPT: A) how best to bring additional funds into the firms B)
which projects to invest in C) how best to increase the firms risk D) how
best to return the profits form the firms projects to the owners over time.
Answer: C -Slide 9, Chp. 1
◍ The firm's debt payments are a ____ cost of financing.Increasing a firm's
financial leverage makes its equity riskier!.
