C214 Final EXAM Questions AND Correct Answers
CAPM Model - ✔✔Allows to determine expected return on stocks and
incorporates risk
Coupon Rate - ✔✔The interest rate that a company promises to pay on bonds
Discretionary Financing Needed equals? - ✔✔Projected Total Assets - Projected
Total Liabilities - Projected Equity
Do stock holders or bond holders have voting rights? - ✔✔Stock holders have
voting rights
Dodd Frank regulates which segment of the US Economy? - ✔✔Banking industry
Gordon Growth Model - ✔✔Assumes stable growth rates and does not
incorporate risk
How can a firm speed up collections? - ✔✔Offer discounts to pay early and
electronic check processing
How do private companies maximize shareholder value? - ✔✔By keeping
control within the company
How do public companies maximize shareholder value? - ✔✔By maximizing
Earnings Per Share
, How does credit rating impact cost of capital? - ✔✔A rating downgrade will
increase the cost of capital
Internal Rate of Return - ✔✔Defined as the discount rate that results in a Zero
Net Present Value
Is depreciation and salvage value on an asset precise or is it an estimate? - ✔✔It
is an estimate
Market rate - ✔✔Same as YTM - Yield to Maturity
Market Rate - ✔✔The interest rate on other comparable bonds
Market Rate < Coupon Rate - ✔✔Bonds will sell at premium
Market Rate = Coupon Rate - ✔✔Bonds will sell at par value
Market Rate > Coupon Rate - ✔✔Bonds will sell at discount
Par Value - ✔✔The amount payable on maturity of the bond
Positive credit rating has what effect on capital? - ✔✔Lowers cost of capital
Sustainable growth rate - ✔✔How quickly a company can expand using only its
own sources of funding. SGR = ROE * (1 - Dividend Payout Ratio)
CAPM Model - ✔✔Allows to determine expected return on stocks and
incorporates risk
Coupon Rate - ✔✔The interest rate that a company promises to pay on bonds
Discretionary Financing Needed equals? - ✔✔Projected Total Assets - Projected
Total Liabilities - Projected Equity
Do stock holders or bond holders have voting rights? - ✔✔Stock holders have
voting rights
Dodd Frank regulates which segment of the US Economy? - ✔✔Banking industry
Gordon Growth Model - ✔✔Assumes stable growth rates and does not
incorporate risk
How can a firm speed up collections? - ✔✔Offer discounts to pay early and
electronic check processing
How do private companies maximize shareholder value? - ✔✔By keeping
control within the company
How do public companies maximize shareholder value? - ✔✔By maximizing
Earnings Per Share
, How does credit rating impact cost of capital? - ✔✔A rating downgrade will
increase the cost of capital
Internal Rate of Return - ✔✔Defined as the discount rate that results in a Zero
Net Present Value
Is depreciation and salvage value on an asset precise or is it an estimate? - ✔✔It
is an estimate
Market rate - ✔✔Same as YTM - Yield to Maturity
Market Rate - ✔✔The interest rate on other comparable bonds
Market Rate < Coupon Rate - ✔✔Bonds will sell at premium
Market Rate = Coupon Rate - ✔✔Bonds will sell at par value
Market Rate > Coupon Rate - ✔✔Bonds will sell at discount
Par Value - ✔✔The amount payable on maturity of the bond
Positive credit rating has what effect on capital? - ✔✔Lowers cost of capital
Sustainable growth rate - ✔✔How quickly a company can expand using only its
own sources of funding. SGR = ROE * (1 - Dividend Payout Ratio)
