FINANCE 301 Actual Exam Practice Questions
Solved 100% Correct | Verified Answers
True or False: Small-cap stocks are riskier than corporate bonds. ANSWER - true
According to the principles of finance, diversification does what to the risk of an
investment portfolio? ANSWER - decreases
Out of the following, who believes the MOST in behavioral finance? ANSWER - equity
traders
Believers of behavioral finance principles do believe that ANSWER - markets are not
always efficient
The time value of money states that ANSWER - a dollar today is worth more than a
dollar tomorrow
According to the efficient market hypothesis, using technical analysis to forecast future
stock prices is ANSWER - useless
A healthcare company announces it has developed a new drug that will increase its
annual revenue by 5-10% over the next three years. According to the efficient market
hypothesis, the stock price will reflect this news ANSWER - the day of the
announcement
Given the following information, which stock has the highest return?
Stock A: Current Price: $100 - Purchase Price: $85 - Dividends Paid: $3
,Stock B: Current Price: $630 - Purchase Price: $545 - Dividends Paid: $20 ANSWER -
stock A
According to frank Russell's model of investor emotion through market cycles, investor
emotion in 2007 before the financial crisis would be best described as: ANSWER -
euphoria
If biotechnology stocks and utility stocks both provide the same expected return, then
which would you invest in? (Hint: biotechnology companies are much riskier than utility
companies because most of the time the entire company revolves around a single drug
that has not yet been approved) ANSWER - utility stocks
Which two financial metrics does Warren Buffet use to analyze companies? ANSWER -
profit margin & ROE
If the theory of efficient capital markets is correct, which of the following statements is
true?
-It is useless to attempt to beat the market
- Only Wall Street's top bucket analysts are able to beat the market
-All of the Above
-Analysts who have beaten market returns in the past are more likely to beat the
market in the future ANSWER - useless to attempt
True or False: Beta and expected return are not related at all. ANSWER - false
Inflation decreases your return on investment by reducing the future value of the
money you receive on your investment ANSWER - true
,True or False: A dollar today is worth less than a dollar tomorrow. ANSWER - false
All else equal, which of the following stocks should have the highest expected return?
Stock A: Standard Deviation - 15%
Stock B: Standard Deviation - 30%
Stock C: Standard Deviation- 5% ANSWER - Stock B
True or False: In order to achieve the highest level of return for the amount of risk we
can take on, it is very important to not diversify our investments into different asset
classes, and to only invest in small-cap bio-tech stocks. ANSWER - false
The random walk hypothesis is inconsistent with the efficient market hypothesis
ANSWER - false
According to the Principles of Finance, risk aversion means: ANSWER - Investors takes
small risks, but do not avoid risk at all cost
Which of the following is an example of asset allocation? ANSWER - Choosing how much
to invest in stocks vs. bonds
Which of the following duties do NOT fall under the CFO's role as Controller?
-Operating Budgets
-Cash Management
-None of the above
, -Financial Systems
-Taxes ANSWER - cash management
True or False: The CFO is typically involved in only accounting and short term
management activities and is not involved in the long term strategy of the company.
ANSWER - false
If a natural disaster hits a major oil producing region and inhibits global supply, what is
most likely to happen? ANSWER - Oil prices will reflect the lower supply immediately
Which of the following duties do NOT fall under the CFO's role as Treasurer?
-Financial Planning
-Short-Term Capital Requirements
-Audits
-Capital Budgets
-None of the above ANSWER - Audits
Corporate raiders showed that: ANSWER - The best defense against a takeover is a high
stock price
Given the following information, what is Macy's market capitalization?
Annual Sales $27.5B
Annual Net Income $1.5B
Earnings Per Share $3.93
Number of Shares 360 million
Price Per Share $60 ANSWER - $21.6B
Solved 100% Correct | Verified Answers
True or False: Small-cap stocks are riskier than corporate bonds. ANSWER - true
According to the principles of finance, diversification does what to the risk of an
investment portfolio? ANSWER - decreases
Out of the following, who believes the MOST in behavioral finance? ANSWER - equity
traders
Believers of behavioral finance principles do believe that ANSWER - markets are not
always efficient
The time value of money states that ANSWER - a dollar today is worth more than a
dollar tomorrow
According to the efficient market hypothesis, using technical analysis to forecast future
stock prices is ANSWER - useless
A healthcare company announces it has developed a new drug that will increase its
annual revenue by 5-10% over the next three years. According to the efficient market
hypothesis, the stock price will reflect this news ANSWER - the day of the
announcement
Given the following information, which stock has the highest return?
Stock A: Current Price: $100 - Purchase Price: $85 - Dividends Paid: $3
,Stock B: Current Price: $630 - Purchase Price: $545 - Dividends Paid: $20 ANSWER -
stock A
According to frank Russell's model of investor emotion through market cycles, investor
emotion in 2007 before the financial crisis would be best described as: ANSWER -
euphoria
If biotechnology stocks and utility stocks both provide the same expected return, then
which would you invest in? (Hint: biotechnology companies are much riskier than utility
companies because most of the time the entire company revolves around a single drug
that has not yet been approved) ANSWER - utility stocks
Which two financial metrics does Warren Buffet use to analyze companies? ANSWER -
profit margin & ROE
If the theory of efficient capital markets is correct, which of the following statements is
true?
-It is useless to attempt to beat the market
- Only Wall Street's top bucket analysts are able to beat the market
-All of the Above
-Analysts who have beaten market returns in the past are more likely to beat the
market in the future ANSWER - useless to attempt
True or False: Beta and expected return are not related at all. ANSWER - false
Inflation decreases your return on investment by reducing the future value of the
money you receive on your investment ANSWER - true
,True or False: A dollar today is worth less than a dollar tomorrow. ANSWER - false
All else equal, which of the following stocks should have the highest expected return?
Stock A: Standard Deviation - 15%
Stock B: Standard Deviation - 30%
Stock C: Standard Deviation- 5% ANSWER - Stock B
True or False: In order to achieve the highest level of return for the amount of risk we
can take on, it is very important to not diversify our investments into different asset
classes, and to only invest in small-cap bio-tech stocks. ANSWER - false
The random walk hypothesis is inconsistent with the efficient market hypothesis
ANSWER - false
According to the Principles of Finance, risk aversion means: ANSWER - Investors takes
small risks, but do not avoid risk at all cost
Which of the following is an example of asset allocation? ANSWER - Choosing how much
to invest in stocks vs. bonds
Which of the following duties do NOT fall under the CFO's role as Controller?
-Operating Budgets
-Cash Management
-None of the above
, -Financial Systems
-Taxes ANSWER - cash management
True or False: The CFO is typically involved in only accounting and short term
management activities and is not involved in the long term strategy of the company.
ANSWER - false
If a natural disaster hits a major oil producing region and inhibits global supply, what is
most likely to happen? ANSWER - Oil prices will reflect the lower supply immediately
Which of the following duties do NOT fall under the CFO's role as Treasurer?
-Financial Planning
-Short-Term Capital Requirements
-Audits
-Capital Budgets
-None of the above ANSWER - Audits
Corporate raiders showed that: ANSWER - The best defense against a takeover is a high
stock price
Given the following information, what is Macy's market capitalization?
Annual Sales $27.5B
Annual Net Income $1.5B
Earnings Per Share $3.93
Number of Shares 360 million
Price Per Share $60 ANSWER - $21.6B
