FINC300 MIDTERM EXAM
2023.
Question 1 2..5 points
Under which of the following circumstances can you not use the DDM to value a stock?
Question options:
When interest rates are higher than stock returns.
When the dividend is not expected to grow
During an economic contraction
When the dividend growth rate is higher than the required return to the stock
Question 2 .5 points
If the yield to maturity on a bond increases, what will happen to the bond's capital gains yield?
Question options:
It will remain the same
It will increase.
It will decrease
,There is not sufficient information to answer this question.
Question 3 2..5 points
The standard deviation is a:
Question options:
Measure of the relative risk of one asset compared with another.
Numerical indicator of how widely dispersed possible values are distributed around the coefficient of
variation.
Numerical indicator of how widely dispersed possible values are distributed around the correlation
coefficient.
Numerical indicator of how widely dispersed possible values are distributed around the mean.
Question 4 2..5 points
You are investing $100 today in a savings account at your local bank. Which one of the following terms
refers to the value of this investment one year from now?
Question options:
Discounted value.
Present value.
Principal amount
Future value.
Question 5 .5 points
Which of the following items is not used in calculating the value of a stock?
Question options:
Interest rate
Cost of common equity.
Dividend growth rate
Dividend
, Question 6 2..5 points
In terms of risk, labor union disputes, entry of a new competitor and embezzlement by management are
all examples of factors affecting:
Question options:
Diversifiable risk.
Company-specific risk that cannot be diversified away.
Market risk.
Systematic risk.
Question 7 .5 points
Which of the following items reflects the active trading life of the security in question?
Question options:
Default risk premium
Inflation premium
Real risk-free rate.
Maturity risk premium
Question 8 .5 points
Which of the following items is a characteristic of preferred stock?
Question options:
It represents a claim against future common dividends
It gives the owner priority if the firm files for bankruptcy.
Preferred stock owners are taxed at a lower rate.
It can be used to purchase the firm's bonds
Question 9 2..5 points
Susan invested $3,000 five years ago and earns 2 percent interest on her investment. By leaving her
interest earnings in her account, she increases the amount of interest she earns each year. The way she
is handling her interest income is referred to as which one of the following?
Question options:
Simplifying
2023.
Question 1 2..5 points
Under which of the following circumstances can you not use the DDM to value a stock?
Question options:
When interest rates are higher than stock returns.
When the dividend is not expected to grow
During an economic contraction
When the dividend growth rate is higher than the required return to the stock
Question 2 .5 points
If the yield to maturity on a bond increases, what will happen to the bond's capital gains yield?
Question options:
It will remain the same
It will increase.
It will decrease
,There is not sufficient information to answer this question.
Question 3 2..5 points
The standard deviation is a:
Question options:
Measure of the relative risk of one asset compared with another.
Numerical indicator of how widely dispersed possible values are distributed around the coefficient of
variation.
Numerical indicator of how widely dispersed possible values are distributed around the correlation
coefficient.
Numerical indicator of how widely dispersed possible values are distributed around the mean.
Question 4 2..5 points
You are investing $100 today in a savings account at your local bank. Which one of the following terms
refers to the value of this investment one year from now?
Question options:
Discounted value.
Present value.
Principal amount
Future value.
Question 5 .5 points
Which of the following items is not used in calculating the value of a stock?
Question options:
Interest rate
Cost of common equity.
Dividend growth rate
Dividend
, Question 6 2..5 points
In terms of risk, labor union disputes, entry of a new competitor and embezzlement by management are
all examples of factors affecting:
Question options:
Diversifiable risk.
Company-specific risk that cannot be diversified away.
Market risk.
Systematic risk.
Question 7 .5 points
Which of the following items reflects the active trading life of the security in question?
Question options:
Default risk premium
Inflation premium
Real risk-free rate.
Maturity risk premium
Question 8 .5 points
Which of the following items is a characteristic of preferred stock?
Question options:
It represents a claim against future common dividends
It gives the owner priority if the firm files for bankruptcy.
Preferred stock owners are taxed at a lower rate.
It can be used to purchase the firm's bonds
Question 9 2..5 points
Susan invested $3,000 five years ago and earns 2 percent interest on her investment. By leaving her
interest earnings in her account, she increases the amount of interest she earns each year. The way she
is handling her interest income is referred to as which one of the following?
Question options:
Simplifying
