KU Fin 310 Exam 2 UPDATED ACTUAL Questions And Correct Answers
C
Terms in this set (52)
Which of the follow statements is TRUE? b. a stock's price is the present value of its future cash flows, namely, its expected
a. the gordon growth model assumes constant dividend capital gains and dividends
growth but implies that stock prices grow at a
different rate
b. a stock's price is the present value of its future cash
flows, namely, its expected capital gains and dividends
c. brokers buy and sell securities from their own
inventory, while dealers bring buyers and sellers together
to complete transactions
d. holders of common stock have greater voting rights in
corporate decisions than holders of preferred stock, but
they have less voting rights than creditors of the
corporation
Which of the following statements is FALSE? b. compared to corporate bonds, stocks trade far less frequently and with a much
a. the bid price is the price that a dealer is willing to pay larger percentage bid-ask spread
for a security and is lower than the ask price
b. compared to corporate bonds, stocks trade far less
frequently and with a much larger percentage
bid-ask spread
c. in the stock market, the primary market is the market
where new securities are originally sold to investors by
the issuing company
d. dividends received by corporations have a 70% to
100% exclusion from taxable income
The average accounting return method of analyzing b. is similar to calculating the return on assets
projects:
a. incorporate cash flows
b. is similar to calculating the return on assets
c. is difficult to estimate using information from
accounting statements
d. should accept all projects with positive AAR
Which of the following statements is TRUE? c. managerial real options can be very valuable but difficult to measure, and
a. opportunity costs are those values that have already ignoring them will underestimate a projects true net present value
been incurred, cannot be recouped, and should not
be considered in an investment decision
b. under hard capital rationing, a business enforces limits
on investment budgets because it prefers not to
raise financing from the capital markets
c. managerial real options can be very valuable but
difficult to measure, and ignoring them will underestimate
a projects true net present value
d. forecasting risk is more troublesome when NPV
estimates are particularly large
, Which of the following statements is FALSE? d. the error of omission, or Type 1 error NPV estimation, is the risk that a project
a. scenario analysis helps determine the reasonable will be accepted when its true NPV is negative
range of expectations for a projects outcome
b. the impacts of estimation errors and forecasting risks
are small when NPVs are large and negative
c. under intense competition, positive NPV projects are
rare
d. the error of omission, or Type 1 error NPV estimation, is
the risk that a project will be accepted when its true NPV
is negative
Under Munich, a footwear manufacturer, recently c. the price of Under Munich's stock suddenly increases, and then remains at that
announced that they have just designed a new footwear price
product which includes the latest technology. This news is
totally unexpected and viewed as a major advancement
in the footwear industry. Which one of the following
reactions to this announcement indicates the market for
New Labs stock is efficient?
a. the price of Under Munich doesn't change, but then it
increases one week after the announcement
b. the price of all stocks quickly increase in value and
then all but Under Munich stock fall back to their original
values
c. the price of Under Munich's stock suddenly increases,
and then remains at that price
d. the price of Under Munich's stock increases rapidly,
and then settles back to its pre-announcement level
If the financial markets are semi-strong form efficient, b. only individuals with private information have a marketplace advantage
then:
a. only the most talented analysts can determine the true
value of a security
b. only individuals with private information have a
marketplace advantage
c. technical analysis provides the best tool to use to gain
a marketplace advantage d. no one individual has an
advantage in the marketplace
Beta measures __________ risk, while volatility measures ______ b. market-wide; total
risk.
a. asset-specific; market wide
b. market-wide; total
c. total; market wide
d. total; asset specific
Which of the following statement is FALSE? d. only asset-specific risks, not market-wide risks, should earn rewards
a. asset-specific risks can be diversified in a portfolio of
imperfectly correlated assets
b. asset-specific risks can be diversified with numerous
assets in a portfolio
c. bearing risk is rewarded with higher expected returns
d. only asset-specific risks, not market-wide risks, should
earn rewards
C
Terms in this set (52)
Which of the follow statements is TRUE? b. a stock's price is the present value of its future cash flows, namely, its expected
a. the gordon growth model assumes constant dividend capital gains and dividends
growth but implies that stock prices grow at a
different rate
b. a stock's price is the present value of its future cash
flows, namely, its expected capital gains and dividends
c. brokers buy and sell securities from their own
inventory, while dealers bring buyers and sellers together
to complete transactions
d. holders of common stock have greater voting rights in
corporate decisions than holders of preferred stock, but
they have less voting rights than creditors of the
corporation
Which of the following statements is FALSE? b. compared to corporate bonds, stocks trade far less frequently and with a much
a. the bid price is the price that a dealer is willing to pay larger percentage bid-ask spread
for a security and is lower than the ask price
b. compared to corporate bonds, stocks trade far less
frequently and with a much larger percentage
bid-ask spread
c. in the stock market, the primary market is the market
where new securities are originally sold to investors by
the issuing company
d. dividends received by corporations have a 70% to
100% exclusion from taxable income
The average accounting return method of analyzing b. is similar to calculating the return on assets
projects:
a. incorporate cash flows
b. is similar to calculating the return on assets
c. is difficult to estimate using information from
accounting statements
d. should accept all projects with positive AAR
Which of the following statements is TRUE? c. managerial real options can be very valuable but difficult to measure, and
a. opportunity costs are those values that have already ignoring them will underestimate a projects true net present value
been incurred, cannot be recouped, and should not
be considered in an investment decision
b. under hard capital rationing, a business enforces limits
on investment budgets because it prefers not to
raise financing from the capital markets
c. managerial real options can be very valuable but
difficult to measure, and ignoring them will underestimate
a projects true net present value
d. forecasting risk is more troublesome when NPV
estimates are particularly large
, Which of the following statements is FALSE? d. the error of omission, or Type 1 error NPV estimation, is the risk that a project
a. scenario analysis helps determine the reasonable will be accepted when its true NPV is negative
range of expectations for a projects outcome
b. the impacts of estimation errors and forecasting risks
are small when NPVs are large and negative
c. under intense competition, positive NPV projects are
rare
d. the error of omission, or Type 1 error NPV estimation, is
the risk that a project will be accepted when its true NPV
is negative
Under Munich, a footwear manufacturer, recently c. the price of Under Munich's stock suddenly increases, and then remains at that
announced that they have just designed a new footwear price
product which includes the latest technology. This news is
totally unexpected and viewed as a major advancement
in the footwear industry. Which one of the following
reactions to this announcement indicates the market for
New Labs stock is efficient?
a. the price of Under Munich doesn't change, but then it
increases one week after the announcement
b. the price of all stocks quickly increase in value and
then all but Under Munich stock fall back to their original
values
c. the price of Under Munich's stock suddenly increases,
and then remains at that price
d. the price of Under Munich's stock increases rapidly,
and then settles back to its pre-announcement level
If the financial markets are semi-strong form efficient, b. only individuals with private information have a marketplace advantage
then:
a. only the most talented analysts can determine the true
value of a security
b. only individuals with private information have a
marketplace advantage
c. technical analysis provides the best tool to use to gain
a marketplace advantage d. no one individual has an
advantage in the marketplace
Beta measures __________ risk, while volatility measures ______ b. market-wide; total
risk.
a. asset-specific; market wide
b. market-wide; total
c. total; market wide
d. total; asset specific
Which of the following statement is FALSE? d. only asset-specific risks, not market-wide risks, should earn rewards
a. asset-specific risks can be diversified in a portfolio of
imperfectly correlated assets
b. asset-specific risks can be diversified with numerous
assets in a portfolio
c. bearing risk is rewarded with higher expected returns
d. only asset-specific risks, not market-wide risks, should
earn rewards
