FINMAR (QUIZ)

0.1431

Alpha Industries stock had returns of 17 percent, -11 percent, 9 percent, and 2 percent for four of the last five years, respectively. The average return of the stock over this period was 8.7 percent. What is the standard deviation of the stock's returns?

stakeholders

An employee has a claim on the cash flows of Martin's Machines. This claim is defined as a claim by one of the firm's

general partnership

Any one of the partners can be held solely liable for all of the partnership's debt

0.1115

Assume that last year, Isaac earned 13.6 percent on his investments while U.S. Treasury bills yielded 2.7 percent, and the inflation rate was 2.2 percent. What real rate of return did he earn on his investments last year?

0.1195

Assume you earned 17.1 percent on your investments for a time period when the risk-free rate was 4.2 percent and the inflation rate was 4.6 percent. What was your real rate of return for the period?

0.1670

Based on the past 88 years, the inflation rate averaged 3.0 percent and the U.S. Treasury bill yield was 3.5 percent, and the historical risk premium on small-company stocks was 13.2 percent. If these averages hold, what nominal rate of return should you expect to earn on small-company stocks over the next several years?

Investments

If you accept a job as a domestic security analyst for a brokerage firm, you are most likely working in which one of the following financial areas

Sarbanes Oxley Act

In response to corporate scandals involving companies such as Enron, World Com, Tyco , and Adelphia, an Act is enacted to strengthen protection against accounting fraud and financial malpractice. This act is known as?

stakeholder

Levi had an unexpected surprise when he returned home this morning. He found that a chemical spill from a local manufacturer had spilled over onto his property. The potential claim that he has against this manufacturer is that of a(n)

sole proprietorship

Obtaining additional equity is dependent on the owner's personal finances

Risk premium

On a particular risky investment, investors require an excess return of 7 percent in addition to the risk-free rate of 4 percent. What is this excess return called?

sale of 1,000 shares of newly issued stock by Alt Company to Miquel.

One example of a primary market transaction would be the: - sale of 1,000 shares of newly issued stock by Alt Company to Miquel. - sale of 100 shares of stock by Maria to her best friend. - sale of 5,000 shares of stock owned by a corporate CEO to his son. purchase by Theo of 5,000 shares of stock from his father. - sale by Terry of 50,000 shares of stock to his brother.

0.1022

Over the last four years, the common stock of Plymouth Shippers has had an arithmetic average return of 10.4 percent. Three of those four years produced returns of 16.1 percent, 15.6 percent, and 9.4 percent, respectively. What is the geometric average return for this four-year period?

0.1466

Over the past six years, a stock had annual returns of 18 percent, -6 percent, 2 percent, 27 percent, -11 percent, and 13 percent, respectively. What is the standard deviation of these returns?

automatically increasing management salaries on an annual basis

Probably the least effective means of aligning management goals with shareholder interests is

How much cash should the firm keep in reserve?

Which one of the following is a working capital decision? - How much cash should the firm keep in reserve? - Should the firm borrow money for five or for ten years? - What is the cost of debt financing? - How should the firm raise additional capital to fund its expansion? - What debt-equity ratio is best suited to the firm

Limited liability company

Which organization offers liability protection to some of its owners but not to all of its owners?

.0206

Windsor stock has produced returns of 13.8 percent, 11.7 percent, 2.3 percent, -21.4 percent, and 8.9 percent over the past five years, respectively. What is the variance of these returns?

0.0546

You bought a share of 7.5 percent preferred stock for P91.60 last year. The market price for your stock is now P89.10. What is your total return to date on this investment?

secondary market

You contacted your stock broker this morning and placed an order to sell 300 shares of a stock that trades on the NYSE. This sale will occur in the

0.0605

You purchased 400 shares of KNO stock five years ago and have earned annual returns of 8.3 percent, 9.6 percent, 18.25 percent, -7.7 percent, and 1.8 percent, respectively. What is your arithmetic average return?

.3042

You purchased a zero coupon bond one year ago for P346.72. The market interest rate is now 5.75 percent. If the bond had 15 years to maturity when you originally purchased it, what is your total return to date if the face value of the bond is P1,000?

over-the-counter (OTC) market

a decentralized market—meaning it does not have physical locations, and trading is conducted electronically—in which market participants trade securities directly between two parties without a broker

Efficient Market Hypothesis

A postulate that actual capital markets are efficient.

2.5% or 0.025

A security produced returns of 12 percent, -11 percent, -2 percent, 15 percent, and 9 percent over the past five years, respectively. Based on these five years, what is the probability that an investor in this stock will lose more than 17.06 percent in any one given year?

0.0932

A stock has had returns of 14 percent, -18 percent, 2 percent, 33 percent, 27 percent, and 6 percent over the last six years, respectively. What is the geometric return for this stock?

0.0714

A stock has produced returns of 11.9 percent, 5.6 percent, 16.4 percent, and -4.2 percent over the past four years, respectively. What is the geometric average return?

14.72

A stock has returns for five years of 14 percent, -16 percent, 12 percent, 23 percent, and 4 percent, respectively. The stock has a standard deviation of _____ percent.

7.40

A stock has returns for five years of 14 percent, -16 percent, 12 percent, 23 percent, and 4 percent, respectively. The stock has an average return of ______ percent.

0.1087

A stock has yielded returns of 9 percent, 16 percent, 18 percent, and -6 percent over the past four years, respectively. What is the standard deviation of these returns?

0.1123

A stock produced returns of 14 percent, 17percent, and -1 percent over three of the past four years, respectively. The arithmetic average for the past four years is 6 percent. What is the standard deviation of the stock's returns for the four-year period?

0.0650

Sarah earned a 3.3 percent real rate of return on her investments for the past year. During that time, the risk-free rate was 3.6 percent and the inflation rate was 3.1 percent. What was her nominal rate of return?

-0.0556

Suppose a stock had an initial price of $36 per share, paid a dividend of $.42 per share during the year, and had an ending share price of $34. What was the capital gains yield?

-0.0071

Suppose you bought a P1,000 face value bond with a 5 percent coupon one year ago for P1,020. The bond sells today for P986. If the inflation rate last year was 2.3 percent, what was your total real rate of return on this investment?

Corporate accounting and financial fraud

The Sarbanes-Oxley Act in 2002 was primarily prompted by which one of the following from the 1990s?

Capital Gains Yield

The formula: increase in the price of an investment divided by its original acquisition cost pertains to

current market value per share.

The goal of financial management is to increase the:

Sale of stocks

The main distinction between primary and secondary lies on the

capital structure

The mix of long-term equity financing and debt financing that firms use to support their international activities is known as ________

Agency

The potential conflict of interest between a firm's owners and its managers is referred to as which type of conflict

the market value of existing stock

The primary goal of financial management is to maximize

Dealer market

The primary purpose of this secondary market is to match those who wish to sell with those who wish to buy

working capital management

Theo's BBQ has $48,000 in current assets and $39,000 in current liabilities. Decisions related to these accounts are referred to a

limited partnership

There must be at least one general partner

stock markets

These are venues where companies list their shares and they are bought and sold by traders and investors.

Fisher Equation

This is a concept in economics that describes the relationship between nominal and real interest rates under the effect of inflation. The equation reveals that monetary policy moves inflation and the nominal interest rate together in the same direction.

Dividend yield

This provides investors with a way to make comparisons regarding fixed income from companies with different stock values and different dividend payouts.

Capital gains yield

This yield refers to the rise in the price of an investment such as a stock or bond, calculated as the rise in the security's price divided by the original price of the security.

One advantage of the corporate form of organization

ability to raise larger sums of equity capital than other organizational forms.

geometric average return formula

also known as geometric mean return; is a way to calculate the average rate of return on an investment that is compounded over multiple periods.

Arithmetic Average Return

answers the question: What was your return in an average year over a particular period?

Limited liability companies

are primarily designed to: provide limited liability while avoiding double taxation.

geometric mean

calculated by taking the product of these numbers and raising it to the inverse of the length of the series.

Normal distribution

defined as a bell-shaped frequency distribution that is defined by its average and its standard deviation

Corporate shareholders

have the ability to change the corporation's bylaws

low standard deviation

indicates that the values tend to be close to the mean (also called the expected value) of the set

corporation

is a legal entity separate from its owners

standard deviation

is a measure of the amount of variation or dispersion of a set of values

arithmetic average

is the sum of a series of numbers divided by the count of that series of numbers.

controller

more involved in the presentation of financial statements

Capital Asset Pricing Model (CAPM)

predicts the required rate of return on a stock as the sum of the risk-free rate and the stock beta times the market risk premium

treasurer

takes over to decide how to handle the money; builds relationships with investment banks to agree on the best ventures to grow the company's funds, while the controller discusses the best interest for loans

volatile numbers

the geometric average provides a far more accurate measurement of the true return by taking into account year-over-year compounding that smooths the average.

Efficient markets hypothesis

the hypothesis that securities markets are efficient