FIN300 FRANK SMITH CSU EXAM 2
QUESTIONS AND ANSWERS 2026
VERIFIED.
There is a 50% probability that the Plum company sales will be $12 million next year, a 20%
chance they will be $7 million and a 30% chance they will be $3 million.
How much should Plum expect to sell?
What is the standard deviation of their sales? - ANS $8.3 million
$3.95 million
You want to know how much you lottery ticket is worth. If it costs $1 and your probability of
winning the $30 million dollar prize is 1 in 62,000,000, what is it worth? - ANS .4839 million
The Boogie board Inc firm has a beta a 2.3. If the Risk Free return is 3.5% and in general people
earn 7% for putting their money into stocks, how much is the CAPM required rate of return of
BBI? - ANS 19.6%
If you knew the required rate for BBI was 17%, and with the same beta (2.3) and risk for being in
stocks of 7%, what would be the risk free rate in this scenario? - ANS
Krogers in Conway, Arkansas, wants you to make sure they don't run out of toilet paper over
Toad Suck weekend in May. If the average number of packages you sell is 600 per week, with a
@COPYRIGHT ALL RIGHTS RESERVED PAGE 1 OF 7
, variance of 5250 per week, how many should you make sure you order to be pretty certain that
you won't run out? - ANS 72.46
One of the basic relationships in interest rate theory is that, other things held constant, for a
given change in the required rate of return, the the time to maturity, the _____ the change in
price.
a. longer; smaller.
b. shorter; larger.
c. longer; greater.
d. shorter; smaller.
e. Statements c and d are correct. - ANS Statements c and d are correct
Which of the following events would make it more likely that a company would choose to call its
outstanding callable bonds? - ANS a reduction in market interest rates
Which of the following statements is most correct
a. All else equal, if a bond's yield to maturity increases, its price will fall.
b. All else equal, if a bond's yield to maturity increases, its current yield will fall
c. If a bond's yield to maturity exceeds the coupon rate, the bond will sell at premium over par.
d. All of these statements are correct
e. None of these statements are correct - ANS a
Which of the following statements is most correct?
a. Sinking fund provisions do not require companies to retire their debt, they only establish
targets for the company to reduce its debt over time
b. Sinking fund provisions sometimes work to the detriment of bondholders- particularly if
interest rates have declined over time.
@COPYRIGHT ALL RIGHTS RESERVED PAGE 2 OF 7
QUESTIONS AND ANSWERS 2026
VERIFIED.
There is a 50% probability that the Plum company sales will be $12 million next year, a 20%
chance they will be $7 million and a 30% chance they will be $3 million.
How much should Plum expect to sell?
What is the standard deviation of their sales? - ANS $8.3 million
$3.95 million
You want to know how much you lottery ticket is worth. If it costs $1 and your probability of
winning the $30 million dollar prize is 1 in 62,000,000, what is it worth? - ANS .4839 million
The Boogie board Inc firm has a beta a 2.3. If the Risk Free return is 3.5% and in general people
earn 7% for putting their money into stocks, how much is the CAPM required rate of return of
BBI? - ANS 19.6%
If you knew the required rate for BBI was 17%, and with the same beta (2.3) and risk for being in
stocks of 7%, what would be the risk free rate in this scenario? - ANS
Krogers in Conway, Arkansas, wants you to make sure they don't run out of toilet paper over
Toad Suck weekend in May. If the average number of packages you sell is 600 per week, with a
@COPYRIGHT ALL RIGHTS RESERVED PAGE 1 OF 7
, variance of 5250 per week, how many should you make sure you order to be pretty certain that
you won't run out? - ANS 72.46
One of the basic relationships in interest rate theory is that, other things held constant, for a
given change in the required rate of return, the the time to maturity, the _____ the change in
price.
a. longer; smaller.
b. shorter; larger.
c. longer; greater.
d. shorter; smaller.
e. Statements c and d are correct. - ANS Statements c and d are correct
Which of the following events would make it more likely that a company would choose to call its
outstanding callable bonds? - ANS a reduction in market interest rates
Which of the following statements is most correct
a. All else equal, if a bond's yield to maturity increases, its price will fall.
b. All else equal, if a bond's yield to maturity increases, its current yield will fall
c. If a bond's yield to maturity exceeds the coupon rate, the bond will sell at premium over par.
d. All of these statements are correct
e. None of these statements are correct - ANS a
Which of the following statements is most correct?
a. Sinking fund provisions do not require companies to retire their debt, they only establish
targets for the company to reduce its debt over time
b. Sinking fund provisions sometimes work to the detriment of bondholders- particularly if
interest rates have declined over time.
@COPYRIGHT ALL RIGHTS RESERVED PAGE 2 OF 7
