financial mgmt exam 3

Of the options listed below, which is the best example of systematic risk?

Of the options listed below, which is the best example of systematic risk?

Based on the capital asset pricing model (CAPM), which of the following should earn the highest risk premium?

Stock with a beta of 1.24

Assume you are an analyst monitoring Okello stock. Which one of the following would be reflected in Okello's expected return?

This morning Okello confirmed that, as expected, the CFO is retiring at the end of the year.

When calculating a firm's weighted average cost of capital, the capital structure weights:

are based on the market values of the outstanding securities.

An agent who arranges a transaction between a buyer and a seller of equity securities is called a:

broker

When evaluating any capital project proposal, the cost of capital:

depends upon how the funds raised for that project are going to be spent.

Which one of the following risks would a floating-rate bond tend to have less of as compared to a fixed-rate coupon bond?

interest rate risk

Given a well-diversified stock portfolio, the variance of the portfolio:

may be less than the variance of the least risky stock in the portfolio.

Ernst & Frank stock is listed on Nasdaq. The firm is planning to issue some new equity shares for sale to the general public. This sale will definitely occur in which one of the following markets?

primary

For any given capital project proposal, the discount rate should be based on the:

risks associated with the use of the funds required by the project.

The difference between the price that a dealer is willing to pay and the price at which he or she is willing to sell is called the:

spread

The expected return of a stock, based on the likelihood of various economic outcomes, equals the:

weighted average of the returns for each economic state.

You are trying to compare the present values of two separate streams of cash flows that have equivalent risks. One stream is expressed in nominal values and the other stream is expressed in real values. You decide to discount the nominal cash flows using a nominal annual rate of 8 percent. What rate should you use to discount the real cash flows?

comparable real rate

Today, Hannah paid a total of $1,176, including accrued interest, to purchase a 20-year bond that has 6 years left until maturity. This price is referred to as the:

dirty price

The cost of preferred stock is equivalent to the:

rate of return on a perpetuity.

A sinking fund is managed by a trustee for which one of the following purposes?

Early bond redemption

Velasquez Manufacturing has two vastly different lines of business: Alpha and Omega. The Alpha line is the riskiest of the two, and accounts for 72 percent of the firm's sales. When deciding which project proposals should be accepted, the managers should:

assign appropriate, but differing, discount rates to each business line and then select the projects with the highest net present values.

A company has four open seats on its board of directors. There are seven candidates vying for these four positions. There will be a single election to determine the winners. As the owner of 100 shares of stock, you will receive one vote per share for each open seat. You decide to cast all 400 of your votes for a single candidate. What is this type of voting called?

cumulative

When determining a firm's weighted average cost of capital, the item with the least amount of impact is the:

standard deviation of the company's common stock.