BU.920.604
Finance
Midterms (Qns & Ans)
2025
General Instructions
1. Read All Questions Carefully: Make sure you understand each question.
2. Time Management: You have a specific amount of time to complete the exam.
Keep an eye on the clock and pace yourself.
3. Allowed Materials: Only use materials that are explicitly allowed. Unauthorized
materials can lead to disqualification.
4. ANS Format: Follow the required format for your ANS. For example, multiple-
choice questions might need you to select the best ANS, while essay questions
require detailed responses.
5. Academic Integrity: Adhere to the university's honor code. Any form of cheating or
plagiarism is strictly prohibited.
6. Technical Requirements: Ensure your computer and internet connection are
stable. For online exams, you might need a webcam and microphone for proctoring
purposes.
7. Submission: Submit your ANS before the time expires. Late submissions might
not be accepted.
©2024/2025
,1. Which of the following is a key principle of Modern Portfolio
Theory (MPT)?
- A) Maximizing returns without considering risk
- B) Diversification to reduce risk
- C) Investing in a single asset class
- D) Ignoring market volatility
- ANS: B) Diversification to reduce risk
- Rationale: MPT emphasizes diversification to optimize the
balance between risk and return.
2. In the context of the Capital Asset Pricing Model (CAPM),
what does the beta coefficient represent?
- A) The risk-free rate of return
- B) The market return
- C) The volatility of an asset relative to the market
- D) The expected return of an asset
- ANS: C) The volatility of an asset relative to the market
- Rationale: Beta measures an asset's sensitivity to market
movements.
©2024/2025
,3. Which financial statement provides a snapshot of a company's
financial position at a specific point in time?
- A) Income Statement
- B) Balance Sheet
- C) Cash Flow Statement
- D) Statement of Retained Earnings
- ANS: B) Balance Sheet
- Rationale: The balance sheet shows a company's assets,
liabilities, and equity at a specific date.
Fill-in-the-Blank Questions
4. The ___________ is a measure of a company's profitability
that excludes interest and income tax expenses.
- ANS: Operating Income
- Rationale: Operating income reflects the profit generated
from core business operations.
5. ___________ is the process of evaluating the potential
profitability of an investment or project.
- ANS: Capital Budgeting
©2024/2025
, - Rationale: Capital budgeting involves analyzing and
selecting investments that will yield returns over time.
True/False Questions
6. The Efficient Market Hypothesis (EMH) suggests that all
available information is already reflected in stock prices.
- ANS: True
- Rationale: EMH posits that it is impossible to consistently
achieve higher returns than the overall market through stock
selection or market timing.
7. In a leveraged buyout (LBO), the acquiring company uses a
significant amount of equity to finance the purchase.
- ANS: False
- Rationale: An LBO typically involves using a significant
amount of borrowed money (leverage) to finance the acquisition.
Multiple Response Questions
8. Which of the following are components of the Weighted
Average Cost of Capital (WACC)? (Select all that apply)
- A) Cost of Equity
©2024/2025
Finance
Midterms (Qns & Ans)
2025
General Instructions
1. Read All Questions Carefully: Make sure you understand each question.
2. Time Management: You have a specific amount of time to complete the exam.
Keep an eye on the clock and pace yourself.
3. Allowed Materials: Only use materials that are explicitly allowed. Unauthorized
materials can lead to disqualification.
4. ANS Format: Follow the required format for your ANS. For example, multiple-
choice questions might need you to select the best ANS, while essay questions
require detailed responses.
5. Academic Integrity: Adhere to the university's honor code. Any form of cheating or
plagiarism is strictly prohibited.
6. Technical Requirements: Ensure your computer and internet connection are
stable. For online exams, you might need a webcam and microphone for proctoring
purposes.
7. Submission: Submit your ANS before the time expires. Late submissions might
not be accepted.
©2024/2025
,1. Which of the following is a key principle of Modern Portfolio
Theory (MPT)?
- A) Maximizing returns without considering risk
- B) Diversification to reduce risk
- C) Investing in a single asset class
- D) Ignoring market volatility
- ANS: B) Diversification to reduce risk
- Rationale: MPT emphasizes diversification to optimize the
balance between risk and return.
2. In the context of the Capital Asset Pricing Model (CAPM),
what does the beta coefficient represent?
- A) The risk-free rate of return
- B) The market return
- C) The volatility of an asset relative to the market
- D) The expected return of an asset
- ANS: C) The volatility of an asset relative to the market
- Rationale: Beta measures an asset's sensitivity to market
movements.
©2024/2025
,3. Which financial statement provides a snapshot of a company's
financial position at a specific point in time?
- A) Income Statement
- B) Balance Sheet
- C) Cash Flow Statement
- D) Statement of Retained Earnings
- ANS: B) Balance Sheet
- Rationale: The balance sheet shows a company's assets,
liabilities, and equity at a specific date.
Fill-in-the-Blank Questions
4. The ___________ is a measure of a company's profitability
that excludes interest and income tax expenses.
- ANS: Operating Income
- Rationale: Operating income reflects the profit generated
from core business operations.
5. ___________ is the process of evaluating the potential
profitability of an investment or project.
- ANS: Capital Budgeting
©2024/2025
, - Rationale: Capital budgeting involves analyzing and
selecting investments that will yield returns over time.
True/False Questions
6. The Efficient Market Hypothesis (EMH) suggests that all
available information is already reflected in stock prices.
- ANS: True
- Rationale: EMH posits that it is impossible to consistently
achieve higher returns than the overall market through stock
selection or market timing.
7. In a leveraged buyout (LBO), the acquiring company uses a
significant amount of equity to finance the purchase.
- ANS: False
- Rationale: An LBO typically involves using a significant
amount of borrowed money (leverage) to finance the acquisition.
Multiple Response Questions
8. Which of the following are components of the Weighted
Average Cost of Capital (WACC)? (Select all that apply)
- A) Cost of Equity
©2024/2025
