WGU 214 Overview Concept Quiz with verified
answers
5. What is the purpose of the SEC 10-K filing requirement?
a. Prevent insider trading
b. Promote transparency and market efficiency
c. Regulate securities sales practices
d. Prevent monopolies Ans✓✓✓ b. Promote transparency and market efficiency
A bond's duration causes:
a. Default risk
b. Credit risk
c. Market risk
d. Event risk Ans✓✓✓ c. Market risk
A firm is a good invesment if
a. Its PE is low
b. Its price is less than intrinsic value
c. It ROE is high
d. It has a great product Ans✓✓✓ b. Its price is less than intrinsic value
A firm will have volatile profits if
a. It has high operating leverage
b. It has high financial leverage
c. It has high combined leverage
,d. All of the above Ans✓✓✓ d. All of the above
A potential project should be adopted if
a. IRR is less than WACC
b. NPV is positive using the required return on bonds as the discount rate
c. IRR is greater than WACC
d. IRR equals WACC and NPV is positive Ans✓✓✓ c. IRR is greater than WACC
A prudent investor would seek
a. The lowest risk possible
b. The highest return possible
c. Maximum return for investor's risk tolerence
d. Minimize the return-to-risk ratio Ans✓✓✓ c. Maximum return for investor's
risk tolerence
A stock whose return is affected substantially by a recession is:
a. Low beta stock
b. High beta stock
c. Low PE stock
d. High PE stock Ans✓✓✓ b. High beta stock
A stong dollar has what effect?
a. Increases international trade
b. Increases exports
c. Increases imports
, d. Increases interest rates Ans✓✓✓ c. Increases imports
Excessive leverage will likely result in
a. Increased WACC
b. Reduced stock price
c. Reduced profits
d. Both a and b Ans✓✓✓ d. Both a and b
Firms use "sensitivity analysis" because:
a. Required by the SEC
b. To anticipate impact of erroneous forecasts
c. To detect computer code errors
d. To double check analyst calculations Ans✓✓✓ b. To anticipate impact of
erroneous forecasts
For a semi-annual pay bond, which inputs must be adjusted?
a. N and I/Y
b. N and PMT
c. N, I/Y, and PMT
d. PV and FV Ans✓✓✓ c. N, I/Y, and PMT
FX hedging is used to
a. Forecast FX changes
b. Reduce FX risk
c. Arbitrage currency exchange
answers
5. What is the purpose of the SEC 10-K filing requirement?
a. Prevent insider trading
b. Promote transparency and market efficiency
c. Regulate securities sales practices
d. Prevent monopolies Ans✓✓✓ b. Promote transparency and market efficiency
A bond's duration causes:
a. Default risk
b. Credit risk
c. Market risk
d. Event risk Ans✓✓✓ c. Market risk
A firm is a good invesment if
a. Its PE is low
b. Its price is less than intrinsic value
c. It ROE is high
d. It has a great product Ans✓✓✓ b. Its price is less than intrinsic value
A firm will have volatile profits if
a. It has high operating leverage
b. It has high financial leverage
c. It has high combined leverage
,d. All of the above Ans✓✓✓ d. All of the above
A potential project should be adopted if
a. IRR is less than WACC
b. NPV is positive using the required return on bonds as the discount rate
c. IRR is greater than WACC
d. IRR equals WACC and NPV is positive Ans✓✓✓ c. IRR is greater than WACC
A prudent investor would seek
a. The lowest risk possible
b. The highest return possible
c. Maximum return for investor's risk tolerence
d. Minimize the return-to-risk ratio Ans✓✓✓ c. Maximum return for investor's
risk tolerence
A stock whose return is affected substantially by a recession is:
a. Low beta stock
b. High beta stock
c. Low PE stock
d. High PE stock Ans✓✓✓ b. High beta stock
A stong dollar has what effect?
a. Increases international trade
b. Increases exports
c. Increases imports
, d. Increases interest rates Ans✓✓✓ c. Increases imports
Excessive leverage will likely result in
a. Increased WACC
b. Reduced stock price
c. Reduced profits
d. Both a and b Ans✓✓✓ d. Both a and b
Firms use "sensitivity analysis" because:
a. Required by the SEC
b. To anticipate impact of erroneous forecasts
c. To detect computer code errors
d. To double check analyst calculations Ans✓✓✓ b. To anticipate impact of
erroneous forecasts
For a semi-annual pay bond, which inputs must be adjusted?
a. N and I/Y
b. N and PMT
c. N, I/Y, and PMT
d. PV and FV Ans✓✓✓ c. N, I/Y, and PMT
FX hedging is used to
a. Forecast FX changes
b. Reduce FX risk
c. Arbitrage currency exchange
