FINA 3313 TEST 1 REVIEW QUESTIONS AND CORRECT
DETAILED ANSWERS (VERIFIED ANSWERS) ALREADY
GRADED A+
Compound interest pays interest for each time period on the original
investment plus the accumulated interest. Ans✓✓✓TRUE
For a given amount, the lower the discount rate, the less the present
value. Ans✓✓✓FALSE
Converting an annuity to an annuity due decreases the present value.
Ans✓✓✓FALSE
An effective annual rate must be greater than an annual percentage rate.
Ans✓✓✓FALSE
You should never compare cash flows occurring at different times
without first discounting them to a common date. Ans✓✓✓TRUE
An annuity due must have a present value at least as large as an
equivalent ordinary annuity. Ans✓✓✓
Given a set future value, which of the following will contribute to a
lower present value? Ans✓✓✓HIGHER DISCOUNT RATE
,What are the advantages of the corporate form of business organization?
Ans✓✓✓-easy transfer of ownership
-perpetual life
-limited liability
-ease of raising additional funds
Limited liability means that owners of a business are not personally
liable for all of its debts - owners can only lose the lessor of the value of
their investment or $100,000. Ans✓✓✓false
Shareholders get any assets or cash flows of the corporation that remain
after all other debts have been paid. Ans✓✓✓true
We can think of equity as a degree of ownership in any asset after
subtracting all debts associated with that asset. Shareholder equity is
calculated as Total Assets minus Total Liabilities Ans✓✓✓assets
By law, the board of directors makes decisions as a fiduciary on behalf
of company executives. Ans✓✓✓false
The board makes decisions concerning the hiring and firing of
personnel, dividend policies and payouts, and executive compensation.
Ans✓✓✓true
, The separation of ownership (shareholders) and control (managers) in
larger corporations with many shareholders can lead to conflicts of
interest between managers and owners. Ans✓✓✓true
According to the video - it took Enron 16 years to grow from a $10
billion company to a $64 billion company and 24 days to go bankrupt.
Ans✓✓✓24
According to the video - The other thing about people at Enron is a lot of
them were former nerds . Ans✓✓✓nerds
The CEO of Audi was arrested in connection with the investigation Audi
cheated on emissions tests. After viewing the three videos, what would
you tell your daughter? Ans✓✓✓Conflicts of interest can lead managers
to act in ways that can destroy shareholder value.
Tyco CEO Dennis Kozlowski spent $2 million on his wife's 40th
birthday party. Tyco paid 1/2 of the bill, which is an example of an
agency cost. Future President of the United States Donald trump called
his behavior Ans✓✓✓tacky
Amazon and Walmart are examples of corporations because
Ans✓✓✓they are controlled by managers acting as agents for
shareholders who have limited liability
DETAILED ANSWERS (VERIFIED ANSWERS) ALREADY
GRADED A+
Compound interest pays interest for each time period on the original
investment plus the accumulated interest. Ans✓✓✓TRUE
For a given amount, the lower the discount rate, the less the present
value. Ans✓✓✓FALSE
Converting an annuity to an annuity due decreases the present value.
Ans✓✓✓FALSE
An effective annual rate must be greater than an annual percentage rate.
Ans✓✓✓FALSE
You should never compare cash flows occurring at different times
without first discounting them to a common date. Ans✓✓✓TRUE
An annuity due must have a present value at least as large as an
equivalent ordinary annuity. Ans✓✓✓
Given a set future value, which of the following will contribute to a
lower present value? Ans✓✓✓HIGHER DISCOUNT RATE
,What are the advantages of the corporate form of business organization?
Ans✓✓✓-easy transfer of ownership
-perpetual life
-limited liability
-ease of raising additional funds
Limited liability means that owners of a business are not personally
liable for all of its debts - owners can only lose the lessor of the value of
their investment or $100,000. Ans✓✓✓false
Shareholders get any assets or cash flows of the corporation that remain
after all other debts have been paid. Ans✓✓✓true
We can think of equity as a degree of ownership in any asset after
subtracting all debts associated with that asset. Shareholder equity is
calculated as Total Assets minus Total Liabilities Ans✓✓✓assets
By law, the board of directors makes decisions as a fiduciary on behalf
of company executives. Ans✓✓✓false
The board makes decisions concerning the hiring and firing of
personnel, dividend policies and payouts, and executive compensation.
Ans✓✓✓true
, The separation of ownership (shareholders) and control (managers) in
larger corporations with many shareholders can lead to conflicts of
interest between managers and owners. Ans✓✓✓true
According to the video - it took Enron 16 years to grow from a $10
billion company to a $64 billion company and 24 days to go bankrupt.
Ans✓✓✓24
According to the video - The other thing about people at Enron is a lot of
them were former nerds . Ans✓✓✓nerds
The CEO of Audi was arrested in connection with the investigation Audi
cheated on emissions tests. After viewing the three videos, what would
you tell your daughter? Ans✓✓✓Conflicts of interest can lead managers
to act in ways that can destroy shareholder value.
Tyco CEO Dennis Kozlowski spent $2 million on his wife's 40th
birthday party. Tyco paid 1/2 of the bill, which is an example of an
agency cost. Future President of the United States Donald trump called
his behavior Ans✓✓✓tacky
Amazon and Walmart are examples of corporations because
Ans✓✓✓they are controlled by managers acting as agents for
shareholders who have limited liability
