FIN 300 Final Exam 2026 Questions and
Answers
For insider trading to be legally actionable, it must be based on
a. material information that has not been publicly announced
b. material information about the company that is discussed in an article in the Wall
Street Journal
c. material confidential information that if known publicly would cause a
significant change to stock prices
d. Both a and c - Correct answer-d. Both a and c
Which of the following is TRUE regarding the relation between insider trading and
market efficiency?
a. Insider trading does not affect market efficiency as stock prices will not reflect
the insiders' information
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,b. Insider trading causes stock prices to react more quickly to information, leading
to a more efficient market
c. Insider trading will make the market less efficient as investors will be
discouraged from participating in the stock market
d. None of the above - Correct answer-b. Insider trading causes stock prices to
react more quickly to information, leading to a more efficient market
Which of the following statements is NOT true about broker markets?
a. Brokers charge commission fees from their services of bringing together buyers
and sellers.
b. Brokers' extensive contacts provide them with a pool of price information that
individual investors could not economically duplicate themselves.
c. Brokers can guarantee an order because they have an inventory of securities.
d. Investors have an incentive to hire a broker because what they charge as a
commission is less than the cost of direct search. - Correct answer-c. Brokers can
guarantee an order because they have an inventory of securities.
Preferred stock is sometimes treated like a debt security because:
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, a. preferred dividend payments are similar to bond interest payments and are fixed
in nature regardless of the firm's earnings.
b. preferred stockholders receive a residual value and not a stated value.
c. Legally preferred stock is debt security.
d. preferred dividends are deductible from corporate taxable income just like
interest payments on bonds. - Correct answer-a. preferred dividend payments are
similar to bond interest payments and are fixed in nature regardless of the firm's
earnings.
Cortez, Inc., is expecting to pay out a dividend of $2.50 next year. After that it
expects its dividend to grow at 7 percent for the next four years. What is the
present value of dividends over the next five-year period if the required rate of
return is 10 percent?
a. $10.76
b. $11.50
c. $9.80
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Answers
For insider trading to be legally actionable, it must be based on
a. material information that has not been publicly announced
b. material information about the company that is discussed in an article in the Wall
Street Journal
c. material confidential information that if known publicly would cause a
significant change to stock prices
d. Both a and c - Correct answer-d. Both a and c
Which of the following is TRUE regarding the relation between insider trading and
market efficiency?
a. Insider trading does not affect market efficiency as stock prices will not reflect
the insiders' information
©C0PYRIGHT 2025, ALL RIGHTS RESERVED 1
,b. Insider trading causes stock prices to react more quickly to information, leading
to a more efficient market
c. Insider trading will make the market less efficient as investors will be
discouraged from participating in the stock market
d. None of the above - Correct answer-b. Insider trading causes stock prices to
react more quickly to information, leading to a more efficient market
Which of the following statements is NOT true about broker markets?
a. Brokers charge commission fees from their services of bringing together buyers
and sellers.
b. Brokers' extensive contacts provide them with a pool of price information that
individual investors could not economically duplicate themselves.
c. Brokers can guarantee an order because they have an inventory of securities.
d. Investors have an incentive to hire a broker because what they charge as a
commission is less than the cost of direct search. - Correct answer-c. Brokers can
guarantee an order because they have an inventory of securities.
Preferred stock is sometimes treated like a debt security because:
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, a. preferred dividend payments are similar to bond interest payments and are fixed
in nature regardless of the firm's earnings.
b. preferred stockholders receive a residual value and not a stated value.
c. Legally preferred stock is debt security.
d. preferred dividends are deductible from corporate taxable income just like
interest payments on bonds. - Correct answer-a. preferred dividend payments are
similar to bond interest payments and are fixed in nature regardless of the firm's
earnings.
Cortez, Inc., is expecting to pay out a dividend of $2.50 next year. After that it
expects its dividend to grow at 7 percent for the next four years. What is the
present value of dividends over the next five-year period if the required rate of
return is 10 percent?
a. $10.76
b. $11.50
c. $9.80
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