FINANCE 320 FINAL EXAM
QUESTIONS & ACTUAL CORRECT
ANSWERS PASSED 100%
When different investment rules give conflicting answers, then decisions should be
based on the Net Present Value rule, as it is the most reliable and accurate decision
rule. - Correct Answer ✔✔ True
If you build a large enough portfolio, you can diversify away all the risks of a portfolio. -
Correct Answer ✔✔ False
When there are large numbers of people looking to save their money and there is little
demand for loans, one would expect interest rates to be high. - Correct Answer ✔✔
False
A portfolio of stocks can achieve diversification benefits if the stocks that comprise the
portfolio are - Correct Answer ✔✔ not perfectly correlated.
How do the shareholders of most corporations exercise their control of that corporation?
- Correct Answer ✔✔ by electing members of a board of directors
Whose interests should a financial manager consider paramount when making a
decision? - Correct Answer ✔✔ the stockholders who have risked their money to
become owners of the company
Diversification reduces the risk of a portfolio because ________ and some of the risks
are averaged out of the portfolio. - Correct Answer ✔✔ stocks do not move identically
Prior to its maturity date, the price of a zero-coupon bond is its face value. (True or
False) - Correct Answer ✔✔ False
A levered firm is one that has ________ outstanding. - Correct Answer ✔✔ debt
Firms that have many divisions with different lines of business do not use a company-
wide WACC to evaluate projects - Correct Answer ✔✔ True
What is the ultimate goal of the capital budgeting process? - Correct Answer ✔✔ to
determine the effect of the decision to accept or reject a project on the firm's cash flows
Which of the following need be true for an asset to be considered liquid? - Correct
Answer ✔✔ It can be easily bought and sold and the selling price is very close to the
buying price at a given point in time.
QUESTIONS & ACTUAL CORRECT
ANSWERS PASSED 100%
When different investment rules give conflicting answers, then decisions should be
based on the Net Present Value rule, as it is the most reliable and accurate decision
rule. - Correct Answer ✔✔ True
If you build a large enough portfolio, you can diversify away all the risks of a portfolio. -
Correct Answer ✔✔ False
When there are large numbers of people looking to save their money and there is little
demand for loans, one would expect interest rates to be high. - Correct Answer ✔✔
False
A portfolio of stocks can achieve diversification benefits if the stocks that comprise the
portfolio are - Correct Answer ✔✔ not perfectly correlated.
How do the shareholders of most corporations exercise their control of that corporation?
- Correct Answer ✔✔ by electing members of a board of directors
Whose interests should a financial manager consider paramount when making a
decision? - Correct Answer ✔✔ the stockholders who have risked their money to
become owners of the company
Diversification reduces the risk of a portfolio because ________ and some of the risks
are averaged out of the portfolio. - Correct Answer ✔✔ stocks do not move identically
Prior to its maturity date, the price of a zero-coupon bond is its face value. (True or
False) - Correct Answer ✔✔ False
A levered firm is one that has ________ outstanding. - Correct Answer ✔✔ debt
Firms that have many divisions with different lines of business do not use a company-
wide WACC to evaluate projects - Correct Answer ✔✔ True
What is the ultimate goal of the capital budgeting process? - Correct Answer ✔✔ to
determine the effect of the decision to accept or reject a project on the firm's cash flows
Which of the following need be true for an asset to be considered liquid? - Correct
Answer ✔✔ It can be easily bought and sold and the selling price is very close to the
buying price at a given point in time.
