FIN 341 FINAL UPDATED ACTUAL PRACTICE
QUESTIONS WITH DETAILED EXPLANATIONS
2026
◉ Since ROE is an important measure of performance, financial
managers should try to maximize the company's ROE.
Answer: False, maximizing ROE means maximizing debt financing,
and this is not good
◉ EVA is different from Net Income because EVA reflects the cost of
equity as well as the cost of debt
Answer: True
◉ When two mutually exclusive projects are being considered, the
one with the higher ROE should be chosen, regardless of project size.
Answer: False, project size matters
◉ A firm's EPS is highly correlated with its stock price.
Answer: False
◉ While the NASDAQ trades more dollar volume than the NYSE, the
NYSE has a higher share volume traded than the NASDAQ
,Answer: False
◉ In 1792, 68 brokers created the New York Stock & Exchange
Board under the Buttonwood Agreement.
Answer: False, # brokers
◉ In a dutch auction, stocks are sold at the highest bid price that
would sell all of the shares in the offering.
Answer: True
◉ When a company puts out a bond issue and then two years later
puts out another bind issue, the second bond is being sold on the
secondary market.
Answer: False, the first bond is being sold on the secondary market.
◉ A dealer's profit is the bid-ask spread, and this spread generally
becomes larger when the stock is traded more often.
Answer: False, ?
◉ When interest rates are low, an investor should consider buying
bonds and then selling them once interest rates go back up nil they
want to make capital gains on bonds.
Answer: False, buy when high, sell when low.
, ◉ As U.S. rates go up, the dollar should strengthen and help U.S.
companies that import goods
Answer: True
◉ The repeal of the Glass Steagall Act of 1933 under President
Clinton's administration has been partially blamed for the 2008-09
crisis.
Answer: True
◉ Upper corporate managers are highly motivated to give their
stockholders an appropriate return on the stock because if the
stockholders start selling the stock, the company's stock price will
decrease and the company can become a takeover target.
Answer: True
◉ Stock prices have increased significantly since President Trump
was elected due to expectations that the US economy will gain
strength in the future from lower corporate tax rates, repatriation of
corporate cash from abroad, and some deregulation of business.
Answer: True
◉ The spread between yield curves of corporate bonds and Treasury
bonds is larger the longer the maturity because the corporate bonds
are considered riskier if they have a long time to maturity, and
because of this extra risk, they are less liquid.
QUESTIONS WITH DETAILED EXPLANATIONS
2026
◉ Since ROE is an important measure of performance, financial
managers should try to maximize the company's ROE.
Answer: False, maximizing ROE means maximizing debt financing,
and this is not good
◉ EVA is different from Net Income because EVA reflects the cost of
equity as well as the cost of debt
Answer: True
◉ When two mutually exclusive projects are being considered, the
one with the higher ROE should be chosen, regardless of project size.
Answer: False, project size matters
◉ A firm's EPS is highly correlated with its stock price.
Answer: False
◉ While the NASDAQ trades more dollar volume than the NYSE, the
NYSE has a higher share volume traded than the NASDAQ
,Answer: False
◉ In 1792, 68 brokers created the New York Stock & Exchange
Board under the Buttonwood Agreement.
Answer: False, # brokers
◉ In a dutch auction, stocks are sold at the highest bid price that
would sell all of the shares in the offering.
Answer: True
◉ When a company puts out a bond issue and then two years later
puts out another bind issue, the second bond is being sold on the
secondary market.
Answer: False, the first bond is being sold on the secondary market.
◉ A dealer's profit is the bid-ask spread, and this spread generally
becomes larger when the stock is traded more often.
Answer: False, ?
◉ When interest rates are low, an investor should consider buying
bonds and then selling them once interest rates go back up nil they
want to make capital gains on bonds.
Answer: False, buy when high, sell when low.
, ◉ As U.S. rates go up, the dollar should strengthen and help U.S.
companies that import goods
Answer: True
◉ The repeal of the Glass Steagall Act of 1933 under President
Clinton's administration has been partially blamed for the 2008-09
crisis.
Answer: True
◉ Upper corporate managers are highly motivated to give their
stockholders an appropriate return on the stock because if the
stockholders start selling the stock, the company's stock price will
decrease and the company can become a takeover target.
Answer: True
◉ Stock prices have increased significantly since President Trump
was elected due to expectations that the US economy will gain
strength in the future from lower corporate tax rates, repatriation of
corporate cash from abroad, and some deregulation of business.
Answer: True
◉ The spread between yield curves of corporate bonds and Treasury
bonds is larger the longer the maturity because the corporate bonds
are considered riskier if they have a long time to maturity, and
because of this extra risk, they are less liquid.
