MGT 6201 FINANCE CONCEPTS AND PRINCIPLES QUESTIONS & ANSWERS 202… EXAM
P R O F E S S I O N A L P R A C T I C E M AT E R I A L S
MGT 6201 Finance Concepts
and Principles Questions &
Answers 2026-2027
Verified Answers Exam Ready With Rationales
75 QUESTIONS
DOCUMENT OVERVIEW
This document provides 75 finance concepts and principles questions with their correct answers, directly
aligning with MGT 6201. It serves as an excellent study and review resource for students preparing for
exams or certifications in financial principles.
CONTENTS
01 Cost of Capital Q1–Q19
02 Valuation Methods Q20–Q43
03 Capital Budgeting Q44–Q53
04 Economic Value & Performance Q54–Q67
05 Risk & Return Q68–Q72
Page 1
, 06 Firm & Market Dynamics Q73–Q75
E XA M Q U EST I O N S
Q1 QUESTION 1 OF 75
The minimum rate of return a corporation must earn on its invested capital to break even in economic terms
is called the _____.
CORRECT ANSWER
Cost of Capital
Q2 QUESTION 2 OF 75
Why is the cost of debt multiplied by (1 - Tax Rate) when calculating WACC?
CORRECT ANSWER
Interest paid on debt is tax-deductible.
Q3 QUESTION 3 OF 75
What two primary components determine a firm's cost of debt capital?
CORRECT ANSWER
The risk-free Treasury bond rate and a default risk premium.
Q4 QUESTION 4 OF 75
How is a 'basis point' defined in terms of percentage?
CORRECT ANSWER
One basis point equals 0.01% (or 100 basis points equal 1%).
Page 2
, Q5 QUESTION 5 OF 75
In bond ratings, any rating below _____ is considered a junk bond or speculative grade.
CORRECT ANSWER
Triple B (BBB/Baa)
Q6 QUESTION 6 OF 75
Term: Cost of Equity Capital
CORRECT ANSWER
Definition: The rate of return shareholders expect the firm to earn on its equity capital.
Q7 QUESTION 7 OF 75
According to the Capital Asset Pricing Model (CAPM), what is the formula for the cost of equity (R(e))?
CORRECT ANSWER
R(e) = R(f) + [β × (R(m) - R(f))]
Q8 QUESTION 8 OF 75
In the CAPM formula, what does the term (R(m) - R(f)) represent?
CORRECT ANSWER
The Market Risk Premium.
Q9 QUESTION 9 OF 75
Page 3
P R O F E S S I O N A L P R A C T I C E M AT E R I A L S
MGT 6201 Finance Concepts
and Principles Questions &
Answers 2026-2027
Verified Answers Exam Ready With Rationales
75 QUESTIONS
DOCUMENT OVERVIEW
This document provides 75 finance concepts and principles questions with their correct answers, directly
aligning with MGT 6201. It serves as an excellent study and review resource for students preparing for
exams or certifications in financial principles.
CONTENTS
01 Cost of Capital Q1–Q19
02 Valuation Methods Q20–Q43
03 Capital Budgeting Q44–Q53
04 Economic Value & Performance Q54–Q67
05 Risk & Return Q68–Q72
Page 1
, 06 Firm & Market Dynamics Q73–Q75
E XA M Q U EST I O N S
Q1 QUESTION 1 OF 75
The minimum rate of return a corporation must earn on its invested capital to break even in economic terms
is called the _____.
CORRECT ANSWER
Cost of Capital
Q2 QUESTION 2 OF 75
Why is the cost of debt multiplied by (1 - Tax Rate) when calculating WACC?
CORRECT ANSWER
Interest paid on debt is tax-deductible.
Q3 QUESTION 3 OF 75
What two primary components determine a firm's cost of debt capital?
CORRECT ANSWER
The risk-free Treasury bond rate and a default risk premium.
Q4 QUESTION 4 OF 75
How is a 'basis point' defined in terms of percentage?
CORRECT ANSWER
One basis point equals 0.01% (or 100 basis points equal 1%).
Page 2
, Q5 QUESTION 5 OF 75
In bond ratings, any rating below _____ is considered a junk bond or speculative grade.
CORRECT ANSWER
Triple B (BBB/Baa)
Q6 QUESTION 6 OF 75
Term: Cost of Equity Capital
CORRECT ANSWER
Definition: The rate of return shareholders expect the firm to earn on its equity capital.
Q7 QUESTION 7 OF 75
According to the Capital Asset Pricing Model (CAPM), what is the formula for the cost of equity (R(e))?
CORRECT ANSWER
R(e) = R(f) + [β × (R(m) - R(f))]
Q8 QUESTION 8 OF 75
In the CAPM formula, what does the term (R(m) - R(f)) represent?
CORRECT ANSWER
The Market Risk Premium.
Q9 QUESTION 9 OF 75
Page 3
