FINA 3313
What is the beta of a three-stock portfolio that includes 25% of stock A with a beta of 0.90, 40% stock B with a beta of 1.05, and 35% stock C with a beta of 1.73?
1.25
What is Amazon's WACC? Note: Amazon does not have r preferred stock. Apply the CAPM to estimate the cost of equity using the expected market return and risk-free rate from the Walmart WACC estimate. Answer to 2 decimal places in % format w/o % sign.
14.27
Mackenzie Bezos, the ex-wife of founder Jeff Bezos, owns a large number of Amazon's shares. Using the Bloomberg quote data in 6.4, what is the market value of Mrs. Bezos Amazon holdings? in Billions w/o $ sign. (2 numbers after the decimal point)
48.26
Suppose you hold a portfolio of two stocks in the healthcare industry. The future outcomes for these stocks depend mainly on the next healthcare bill to be passed by Congress. The possible outcomes and returns are: What is the expected return and a standard deviation of a portfolio that has 50% of its value in stock A and 50% in stock B?
5.1% and 3.2%
What is the standard deviation of Walmart's stock returns over the 5 months in 2020? Answer in % terms w/o % sign and to 4 decimal places (1.2345)
5.7626
Suppose you hold a portfolio of two stocks in the healthcare industry. The future outcomes for these stocks depend mainly on the next healthcare bill to be passed by Congress. The possible outcomes and returns are: What is the expected return and a standard deviation of a portfolio that has 80% of its value in stock A and 20% in stock B?
7.5% and 1.1%
What is the standard deviation of a portfolio with 40% allocated to Walmart and 60% allocated to Amazon over the 5 months in 2020? Answer in % terms w/o % sign and to 4 decimal places (1.2345)
9.2078
Which of the following changes, if of a sufficient magnitude, could turn a negative NPV project into a positive NPV project?
A decrease in the fixed costs
Which of the following bonds would be likely to exhibit a greater degree of interest-rate risk?
A zero-coupon bond with 20 years until maturity.
What do you think Apple's stock will be in three months? If your valuation is based on where the stock is today, you could be exhibiting what irrational behavior?
Anchoring
A corporation is contemplating an expansion project. The CFO plans to calculate the project's NPV by discounting the relevant cash flows (which include the initial up-front costs, the operating cash flows, and the terminal cash flows) at the corporation's cost of capital (WACC). Which of the following factors should the CFO include when estimating the relevant cash flows?
Any opportunity costs associated with the project.
The benefits of portfolio diversification are highest when the individual securities have returns that
Are uncorrelated with the rest of the portfolio
Which of these are liquidity ratios?
Cash Ratio Quick Ratio Current Ratio
Which component is more likely to be biased if book values are used in the calculation of WACC rather than market values?
Common stock.
Matching those following concepts
Correlation: STATISTICAL MEASUREMENT... correlation coefficient: MEASURE OF THE... Perfectly positively correlated: TWO POSITIVELY... Perfectly negatively correlated: TWO NEGATIVELY...
What are advantages of payback period?
Does not require discount rate Does not require complex calculations Measures Liquidity, Easy to communicate
Which of the following is correct for a bond priced at $1,100 that has ten years remaining until maturity, and a 10% coupon, with semiannual payments?
Each payment of interest equals $50.
The average of beta values for all individual stocks is
Exactly 1.0; these stocks represent the market
An advantage of organizing a firm as a corporation is that taxes are paid at the shareholder level.
False
It should not usually be clear whether we are describing independent or mutually exclusive projects in the following chapters because when we only describe one project then it can be assumed to be independent
False
Large and active stock markets are not very efficient because they do not react to relevent market news.
False
Lending discrimination occurs when lenders base credit decisions on factors related to the applicant's creditworthiness.
False
Limited liability means that owners of a business are not personally liable for all of its debts - owners can only lose the lessor of the value of their investment or $100,000.
False
Manager of actively managed funds are investment professional who typically beat the market.
False
NPV assumes intermediate cash flows are reinvested at the cost of equity, while IRR assumes that they are reinvested at the cost of capital
False
Net present value (NPV) is a sophisticated capital budgeting technique; found by adding a project's initial investment from the present value of its cash inflows discounted at a rate equal to the firm's cost of capital.
False
Suppose you have an investment in a stock that had a negative 50% return (a loss) in the first year and a positive 50% return (a gain) in the second year. The geometric returns is 0%
False
The efficient-market hypothesis (EMH) is a theory describing the behavior of an assumed "perfect" market in which securities are in equilibrium, security prices fully reflect all available information and react swiftly to new information, and yet stocks are not fully and fairly priced, so investors will not waste time looking for mispriced securities
False
You paid 10 USD for an asset and sold it for 15 USD three years later. Your average annual return on this investment is 50%/3 = 16.67%.
False
municipal bonds or "munis" are risk-free
False
What tools can be used to solve time value of money problems?
Financial calculator Tables of TVM factors Excel spreadsheet Manually by a mathematical formula
Complete the following sentence. The WACC _________________.
For a firm represents the risk and target capital structure of the firm's existing assets as a whole.
The standard deviations of individual stocks are generally higher than the standard deviation of the market portfolio because individual stocks
Have no diversification of risk
If you were willing to bet that the overall stock market was heading up on a sustained basis, it would be logical to invest in
High beta stocks
If the Federal Reserve took action to increase interest rates, a firm's cost of capital would _________________ , ceteris paribus.
Increase
Which of the following statements is correct about a stock currently selling for $50 per share that has 16% expected return and a 10% expected capital appreciation?
It is expected to pay $3 in annual dividends
____________________ results from the use of fixed - cost assets or funds to magnify returns to a firm's owners.
Leverage
Which of these are market ratios?
Market-to-Book Ratio P/E Ratio Earnings Per Share Market Capitalization
Match those concepts for bond's characteristics
Maturity date: THE DATE ON WHICH... Coupon rate: THE INTEREST PAYMENT... Face Value: PAR VALUE, OR...
Match the investment types
Mutual fund: INVESTMENTS THAT POOL... Index fund: TYPE OF MUTUAL FUND...
Projects that compete with one another so that the acceptance of one eliminates from further consideration all other projects that serve a similar function.
Mutually Exclusive
The "gold standard" of investment criteria refers to:
NPV
A firm is currently faced with two investment opportunities. Assume the following: -Investment A Cost = $100,000 Life = 20 years Expected Return = 7% -Investment B Cost = $100,000 Life = 20 years Expected Return = 12% Cost of Equity: 14% Cost of Debt Financing: 6% If the firm uses only equity financing, which investment(s) would it make?
Neither investment
Which of the following statements is most correct?
None of the statements above is correct.
What are the advantages of the corporate form of business organization?
Perpetual life Limited liability Easy transfer of ownership Ease of raising additional funds
Match the following concepts
Proxy voting: ALLOWING SOMEONE... Board of Directors: THE COMMITTEE THAT... Preemptive right: THE RIGHT TO... straight-line voting: EACH CANDIDATE FOR... cumulative voting: BOARD SEATS ARE...
Which of the following statements best describes the real interest rate?
Real interest rates can be negative, zero, or positive.
The major benefit of diversification is to
Reduce the expected risk
Matching those following investor behaviors theories
Regret theory: DEALS WITH THE EMOTION... Prospect theory: SUGGESTS THAT PEOPLE... Herding: SOME INVESTORS... Anchoring: THE TENDENCY OF INVESTORS... Confirmation bias: TENDENCY TO INTERPRET...
The disadvantages of the IRR period method is that it
Requires complex calculations Requires a lot of data (estimates of all CFs) Only works for normal cash flows
Match those following concepts about risk of a single asset
Scenario analysis: AN APPROACH FOR... Range: A MEASURE OF AN... Probability: THE CHANCE THAT A... probability distribution: A MODEL THAT RELATES...
Which of the following is not considered a capital component for the purpose of calculating the weighted average cost of capital as it applies to capital budgeting?
Short-term debt used to finance seasonal current assets.
List steps of the capital budgeting process
Step 1: PROPOSAL GENERATION Step 2: REVIEW AND ANALYSIS Step 3: DECISION MAKING Step 4: IMPLEMENTATION Step 5: FOLLOW-UP
The degree of operating leverage has which of the following characteristics?
The DOL relates the change in sales to the change in net operating income.
Which of the following is a true statement regarding publicly traded stocks and bonds?
The constant dividend growth model can be used to value stocks only if the dividend growth rate remains constant.
Which of the following statements is correct for a project with a negative NPV?
The cost of capital exceeds the IRR
Which of the following statements is correct?
The degree of operating leverage (DOL) depends on a company's fixed costs, variable costs, and sales. The DOL formula assumes (1) that fixed costs are constant and (2) that variable costs are a constant proportion of sales.
Match those following concepts for first principle
The investment decision: INVEST IN... The financing decision: FIND THE RIGHT... The dividend decision: IF YOU CAN'T FIND...
Which of the following statement is correct
The reduction in risk that is accomplished by combining stocks in a portfolio is called diversification
Bond's principal amount is repaid at maturity
True
For a given level of dividends, a higher stock price implies a lower expected return and a lower stock price implies a higher expected return.
True
In addition to voting, shareholders also have a claim on the firm's assets, after all debts have been paid.
True
In straight-line voting, each candidate for the board of directors is elected by a majority vote. Therefore, any voting block which controls 51% of the votes will be able to elect all board members. Straight-line voting tends to favor large blockholders at the expense of small shareholders.
True
The Internal Rate of Return (IRR) is the discount rate that equates the NPV of an investment opportunity with $0
True
The main vote that shareholders have is to elect the Board of Directors
True
The multiple IRR problem occurs when the signs of a project's cash flows change more than once.
True
The value of a share of stock should be the present value of all future cash flows payable to shareholders, discounted at a rate that accounts for risk.
True
Macro events only are reflected in the performance of the market portfolio because
Unique risks have been diversified away
The variance of an investment's returns is a measure of the:
Volatility of the rates of return
Jon Stevens, BNSF Vice President and Controller describes the capital spending process primarily as
a means to ensure regulatory compliance a balancing act that requires careful evaluation of the costs and benefits of each project
Financial markets are __________ in which suppliers of funds and demanders of funds can transact business directly.
auctions
What do companies do with excess cash flows generated by their operations?
cash payment in a form of dividend to shareholders reinvest in the firm
What is true about WMT bond quote (click here)
coupon rate is 3.7% issue price is 996.94
A stock's ______ is found by dividing the stock's annual dividend by its closing price.
current yield
Financial leverage is borrowing money to amplify the outcome of a ________.
deal
You have a portfolio that consists of equal amounts of IBM stock and Treasury bills. If you replace one-third of the IBM stock with more Treasury bills, the variance of the expected portfolio returns will
decrease
You plan to sell some of your General Motors common stock (which tends to move up and down with the economy as a whole) and replace it with the common stock of Hercules Gold Mining, Inc. (whose shares tend to rise when the economy falls and vice versa). Your portfolio's beta should:
decrease
If a 20% reduction in forecast sales would not extinguish a project's profitability, then sensitivity analysis would suggest:
deemphasizing that variable as a critical factor.
What types of analyses do the BNSF strategic studies team conduct?
discounted cash flow sensitivity
What types of projects does the BNSF strategic studies team evaluate?
discretionary
Common stock can be valued using the perpetuity formula if the:
dividends are not expected to grow
If a stock consistently goes down (up) by 1.6% when the market goes down (up) by 1.2%, then its beta
equals 1.33
News that has been "discounted" by the market is reflected in the ________ portion of the total return.
expected
What are the characteristics of preferred stock?
fixed dividend payment may carry some voting rights, but generally not as many voting rights as common stock don't have voting right all debts must be paid before to bondholders before preferred stockholders are paid
What are the possible patterns for future dividends? Check all that apply.
grow at a constant rate grow at a changing rate constant over time decrease at a constant rate
A liquid market -
has many available buyers and sellers and comparatively low transaction costs
Who can issue munis?
highway authorities, school districts, universities, airports, or public utilities any branch of a state, county city government
You have a portfolio that consists of equal amounts of IBM stock and Treasury bills. If you replace one-third of Treasury bills with more IBM stock , the expected portfolio return will ______, ceteris paribus.
increase
According to the article, "Sunk cost fallacy: Throwing good money after bad," how can banks limit losses from bad loans?
increase bank executive turnover
Generally, increases in leverage result in______________ return and _____________________ risk.
increased; increased
As described in "The 2008 Credit Crisis Visualized," the financial system, commonly known as Wall Street, brings together
investors and homeowners (borrowers)
Identify which of these are the relevant cash flows when considering a capital budgeting project.
lost rent from retail facility remodeling expenses for new store increase in inventory expected salvage value of manufacturing equipment
The primary purpose of capital budgeting is to:
maximize the shareholders' wealth.
In theory, a firm should maintain financial leverage consistent with a capital structure that
maximizes the owner's wealth
According to the video - The other thing about people at Enron is a lot of them were former ________.
nerds
The firm can be thought of as a ______________ of policies.
nexus
Match those following concepts about risk and return:
portfolio: A COLLECTION... Risk: VARIABILITY OF RETURNS... Return: TOTAL GAIN OR LOSS... Risk neutral: ATTITUDE... OF ITS RISK Risk averse: ATTITUDE... INCREASE IN RISK Risk seeking: ATTITUDE... EXPECTED RETURNS
The firm exists to create value for _____________________.
stakeholders
Which is true about the measure of risk?
summarize how far away the actual returns in each outcome are from the expected return describe how certain, or uncertain about an expected (future) return
In the formula r = D1/P0 + g, what does g represent?
the expected price appreciation yield from a common stock
Amazon and Walmart are examples of corporations because
they are controlled by managers acting as agents for shareholders who have limited liability
Capital rationing may be beneficial to a firm if it:
weeds out proposals with weaker or biased NPVs.
The discount rate that makes the present value of a bond's payments equal to its price is termed the:
yield to maturity.
You are considering investing in a firm The dividend on the company's stock has not changed in the past ten years and most likely will not change in the foreseeable future. In this case, the most appropriate stock valuation model would be the _________ model.
zero growth
The top corporate tax rate is ... percent for 2018 and after.
21
According to the video - it took Enron 16 years to grow from a $10 billion company to a $64 billion company and ____ days to go bankrupt.
24
BNSF projects must be expected to earn at least what rate of return to be funded (implemented)?
9%
The present value of an annuity stream of $100 per year is $614 when valued at a 10% rate. By approximately how much would the value change if these were annuities due?
An increase of $61.
Who is a financial manager?
Anyone whose decisions affect the cash flows of the firm.
We can think of equity as a degree of ownership in any asset after subtracting all debts associated with that asset. Shareholder equity is calculated as Total ________ minus Total Liabilities
Assets
What are the bond's features?
Bonds give no ownership rights to their owners Correct! securities that generally make fixed interest payments for a fixed number of time periods The principal amount is repaid at maturity
The CEO of Audi was arrested in connection with the investigation Audi cheated on emissions tests. After viewing the three videos, what would you tell your daughter?
Conflicts of interest can lead managers to act in ways that can destroy shareholder value.
Once a firm decides to accept a project, then the financial manager must decide where to get the money to pay for the project. Funding for a project can be simplified from
Debt Equity
Revenues or Sales ←money received by the firm - Expenses ← debts to suppliers and employees - ??? ← accounting item to estimate a reduction in the value of an asset with the passage of time, due in particular to wear and tear = EBIT ←Earnings before Interest and Taxes - Interest Expense ← Money owed to banks or bondholders = EBT ←Earnings before taxes - Tax ← debt to the government = Net Income ←Net Income
Depreciation Expense
Match those following concepts
Discount Bond: BOND THAT IS ISSUED... Premium Bond: BOND TRADING ABOVE... Par-valued bond: BOND PRICE THAT EQUALS...
Which are payout and growth rate ratios?
Dividend Payout Ratio Sustainable Growth Rate Internal Growth Rate Retention Ratio
Match those 3 theories that explain the general shape of the yield curve
Expectations theory: THEORY THAT THE... Liquidity preference theory: LONG-TERM RATES... Market segmentation theory: MARKET FOR LOANS...
The single period TVM lump sum formula can be used to solve for PV, FV, or r. Which is the correct formula?
FV = PV(1+r)
An ordinary (deferred) annuity is an annuity for which the cash flow occurs at the beginning of each period.
False
Book values have the disadvantage that they change unpredictably and may not be easy to measure.
False
By law, the board of directors makes decisions as a fiduciary on behalf of company executives.
False
Depreciation represents a change in cash holdings so it impacts earnings after taxes.
False
Finance is mainly a backward-looking summary of past decisions.
False
From Professor Charles' youtube talk in the e-text. Suppose you have two labor markets with different sets of employers and with different average prejudice against Blacks levels. Therefore, discrimination against Blacks will be worse, as measured by wage gaps between Whites and Blacks, in the labor market with the highest average level of prejudice against Blacks.
False
Investment banks make loans that individuals and businesses use to buy goods or expand business operations, which in turn leads to more deposited funds that make their way to bank
False
Liquidity ratios measure a company's ability to pay debt obligations and its margin of safety through the calculation of metrics including the cash ratio, the quick ratio, the water ratio, and the current ratio.
False
Net income is determined by accounting items such as depreciation and represents actual changes in the cash available to a firm.
False
Profitability ratios give measures of how the firm's accounting measures of profits are related to its other accounting items. A Profit Margin is the firm's profit per dollar of assets and there are three main profit margin measures.
False
Shareholders are also known as the residual owners of the firm's cash flows - they only get paid after other stakeholders are content.
False
Suppose a project under consideration will earn returns equal to current investments but its expected returns are less certain (i.e., riskier). Financial managers would accept this project for investment.
False
The advantage to savers and investors of receiving compound interest rather than simple interest is that future values are larger because interest is earned on accumulated interest payments. Also, the difference in future values becomes smaller as time goes by.
False
The capital market is where firms obtain external short term financing.
False
The market value of an assets is its cost at the time of purchase
False
The purpose of liquidity ratios is to determine a company's ability to pay off current debt obligations by raising external capital.
False
The risk of default for bond means the bond buyer fails to make interest or principal payments
False
The shadow banking system has escaped regulation primarily because it does not accept traditional bank deposits. As a result, many of the shadow banking institutions have been able to employ higher market, credit and liquidity risks, and have higher capital requirements.
False
There is a linear relationship between future values and the number of compounding periods for any present value and non-zero interest rate.
False
The nominal rate differs from the real rate of interest, r* as a result of two factors:
Issuer and issue characteristics such as default risks and contractual provisions as reflected in a risk premium (RP) Inflationary expectations reflected in an inflation premium (IP)
Which of these are leverage ratios?
Long-term Debt Ratio Debt/Equity Ratio Debt Ratio Equity Multiplier
The goal of maximizing shareholder wealth can be expressed in several equivalent ways (select all correct answers)
Maximizing the market capitalization of the firm Maximizing the long-term value of stock Maximizing shareholder returns
Profit maximization may not lead to the highest possible share price because (check all correct)
Profit maximization fails to account for risk - extremely profitable opportunities may be too risky. Timing is important—the receipt of funds sooner rather than later is preferred. Time is money! Profits do not necessarily result in cash flows available to stockholders. There is a difference in accounting values and cash flows.
Which of these are profitability ratios?
ROE ROA Net Profit Margin
Which of these are Turnover ratios?
Receivables Turnover Inventory Turnover Ratio Days' Sales in Inventory Total Asset Turnover Ratio
What practice made it impossible for many members of minority groups to qualify for loans to buy and improve homes?
Redlining
Suppose Fidelity Investments requires applicants for its financial advisor positions to have the Chartered Financial Analyst (CFA) designation, hires no Black financial advisors, and very few Blacks have the CFA designation. The disparity in Fidelity's hiring of White versus Black financial advisors is most likely attributable to
Statisical Discrimination
Select all the different methods that can be used to compute depreciation expense.
Straight-line Depreciation Modified Accelerated Cost Recovery System (MACRS) Accelerated Cost Recovery System (ACRS)
Lending discrimination happens when lenders base credit decisions on factors other than the borrower's creditworthiness, including any of the protected classes defined under federal law. Today, what three federal laws offer protection against lending discrimination?
The Fair Housing Act, The Community Reinvestment Act, and the Equal Credit Opportunity Act
The market value of healthy companies exceed their book value. After all, if managers are not creating value investors will close the business and liquidate (sell) the assets and be better off.
True
The separation of ownership (shareholders) and control (managers) in larger corporations with many shareholders can lead to conflicts of interest between managers and owners.
True
The yield is what we would consider to be the interest rate if we take the price as the present value, the coupon payments as the payments, and the face value as the future value.
True
You should never compare cash flows occurring at different times without first discounting them to a common date.
True
What are the features of the US Treasury?
US treasury bond will have a higher price and lower yield than the corporate bond if they have the same time to maturity no risk of default the yields on US treasuries are commonly used as a benchmark in order to evaluate the impact of risk on other bonds They can have risk arising from other sources, such as politics, inflation, changing interest rates, taxes, and liquidity
Operating Cash Flow (OCF) = X - Y+ Z
X - Ebit Y - taxes Z - depreciation
Match those following concepts about bond characteristics
Zero-coupon bonds: BONDS HAVE NO COUPNS... Collateral: WHEN THERE ARE SPECIFIC... Sinking fund: WHEN THERE IS A BANK... Seniority: THERE IS A SPECIFIC ORDERING... Callable: THE ISSUER CAN REPURCHASE... Convertible: THE BONDHOLER CAN...
Francis Galton's discovery was
a diverse collection of independently deciding individuals is likely to make better value decisions than individuals or even experts
According to the letter to shareholders in Berkshire Hathaway's 2019 Annual Report, Berkshire seeks to buy new businesses that
are available at a sensible price are run by able and honest managers earn good returns on the net tangible capital required in their operation
From "The Big Short," the antagonists (those betting against the big banks) individually or together
argued fraud has never worked (long term) sought to profit from the greed and stupdity of big banks argued there is no diffference between stupid and illegal
What does the author of the article get wrong about maximizing shareholder value?
confuses shareholder wealth maximization goals with greed creating shareholder value requires creating vlaue for customers. does not acknowledge shareholders are residual owners of cash flows
The Balance Sheet shows both the assets of a firm and how those assets were financed. The left-hand side of the balance sheet lists The right-hand side of the balance sheet lists Current Assets Current Liabilities
everything that a firm has (firm's assets) How those assets were paid for either equity or debt cash, accounts receivable, inventory Accounts payable, Notes payable
The shadow banking system refers to ______________________ involved in facilitating the creation of credit, that is lending, much like traditional banks but are not subject to regulatory oversight.
financial intermediaries
Other things being equal, the more frequent the compounding period, the:
higher the effective annual interest rate.
Other things being equal, the more frequent the compounding period, the:
higher the future value
As described in "The 2008 Credit Crisis Visualized," low interest rates
incentivized banks to increase leverage
Profit maximization may not lead to the highest possible share price for at least three reasons They are,
profits not always available to shareholders, timing, risk
The difference between ... and ... is referred to as Net Working Capital
short term assets/short-term liabilities
Tyco CEO Dennis Kozlowski spent $2 million on his wife's 40th birthday party. Tyco paid 1/2 of the bill, which is an example of an agency cost. Future President of the United States Donald trump called his behavior
tacky
What is the hurdle rate?
the cost of financing
Spread topic
the spread: THE DIFFERENCE IN YIELDS default spread: THE DIFFERENCE BETWEEN TWO BONDS THAT ARE SIMILAR... term spread: THE DIFFERENCE BETWEEN TWO BONDS WITH THE SAME LEVEL...
Why do firms need the financial system?
to facilitate short term cash management policies accommodate near term cash inflows and outflows to obtain long term funds
Which of the following is NOT true about the time value of money concept?
The general approach is to take money received in the future as a benchmark and compare that to how much the same amount of money is worth now.
Match those following concepts about interest rates
The term interest rate is usually applied to: DEBT INSTRUMENTS... The term required return is usually applied to: EQUITY INSTRUMENTS... The real risk-free rate of interest is: THE RATE THAT... Inflation: MEASURES THE... Real interest rate: WHEN AN INTEREST...
A collateralized debt obligation (CDO) bundles house payments and creates safe, okay, and risky investment vehildes.
True
An efficient market allocates funds to their most productive uses as a result of competition among wealth-maximizing investors and determines and publicizes prices that are believed to be close to their true value.
True
Finance is the art and science of managing money.
True
Financial institutions are intermediaries that channel the savings of individuals, businesses, and governments into loans or investments.
True
Firms with higher turnover ratios are generally more operationally efficient than firms with lower turnover ratios.
True
From Professor Charles' youtube talk in the e-text. Professor Charles' research shows that average prejudice levels over the past 50 years have decreased dramatically but wage and promotion differences persist but at a lower level.
True
From investors' perspectives, the role of capital markets is to be an efficient market that allocates funds to their most productive uses.
True
From" The Inside Job" trailer - One criticism leveled at investment banks following the 2008 financial crisis was they were having massive private gains at the expense of public losses.
True
Future values are positively related to interest rates and time - the bigger the interest rate and the more compounding periods, the greater the future value will be.
True
If you feel that the value of $107 in one year is just as good as $100 now. the $100 is the Present Value (PV) of the $107 to be received in one year.
True
Leverage may increase both the risk and the return to a firm's shareholders.
True
Liquidity is the ability to convert assets into cash quickly and cheaply.
True
Shareholders get any assets or cash flows of the corporation that remain after all other debts have been paid.
True
The board makes decisions concerning the hiring and firing of personnel, dividend policies and payouts, and executive compensation.
True
