FIN 3050 finance cumulative
McDucket, Inc. generates net profit of $592,000 and has a price-book ratio of 5.2. Total assets are $2,320,000 and total liabilities are $1,289,000. The company has 560,000 common stock outstanding. What is the price-to-earnings ratio?
9.06
Long Life Floors just paid an annual dividend of $.82 a share and plans on increasing future dividends by 2 percent annually. The discount rate is 15 percent. What will the value of this stock be five years from today?
$7.10
Southern Foods just paid an annual dividend of $1.10 a share. Management estimates the dividend will increase by 10 percent a year for the next 4 years. After that, the annual dividend growth rate is estimated at 3.2 percent. The required rate of return is 12 percent. What is the value of this stock today?
$16.21 (Q19 on notes)
A company has a price-earnings ratio of 15 and a price-cash flow ratio of 10. If the earnings per share are $1.39, what is the cash flow per share?
$2.09 (Q27 on notes)
Which one of the following is an intangible fixed asset? A) inventory B) equipment C) building D) accounts receivable E) patent
E) patent
Which of the following is NOT considered in the first filter or phase of top-down analysis? A) domestic spending B) fiscal policy C) monetary Policy D) economic indicators E) business cycles
A) domestic spending
Ultra Fine Furnishings is in the process of selling its peripheral businesses and focusing on its upscale clients. In conjunction with this reorganization, the dividend will be decreased by 10 percent for the next 3 years. After that, the dividend will resume increasing at an annual rate of 5 percent. The required return on this stock is 14 percent and the last dividend paid was $2.40 a share. What is one share of this stock worth today?
$18.35
Main Street Antiques is planning on paying an annual dividend of $2.20 per share next year. The company is slowly downsizing and is decreasing its dividend by 3 percent annually. What is the current value of this stock at a discount rate of 8 percent?
$20 2.2/(8%+3%) = 20 (Q24 on notes)
Mike short sold 400 shares of DeSoto Lumber stock at $22 a share at an initial margin of 70%. The maintenance margin is 35%. What is the highest the stock price can go before he receives a margin call?
$27.70 (Q4 in notes)
A stock is currently selling for $28 a share and has a dividend yield of 3.2%. The risk-free rate is 2.5%. What is the 6-month futures price on this stock?
$27.90 (Q15 on notes)
Jennifer believes that Northern Wine stock is going to decline in value so she is short selling 1,000 shares at $22 a share. Her initial margin requirement is 70% and the maintenance margin is 30%. What is the highest the stock price can go before she receives a margin call?
$28.77 (Q5 in notes)
Matt owns 724.08 shares of a fund which has a current NAV of $41.04. He has owned all these shares for 3.3 years. The fund charges a contingent deferred sales charge which starts at 5% for the first year and declines by 1% each year thereafter. How much cash will he receive if he redeems all of his shares today?
$29,121.92 sales charge = 5-3 = 2 cash = 724.08*41.04*(1-.02) = 29121.92 (Q42 on notes)
A company has net income of $66,000, a price-earnings ratio of 24.1, and 26,000 shares of stock outstanding. If the price-cash flow ratio is 19, what is the cash flow per share?
$3.22 (Q32 on notes)
What is the closing value of one December futures contract on corn? Contract open high. low. close Corn 5000bu, cents/bu 620.5. 623.5. 613 617 Wheat 5000bu cents/bu 804. 810. 798.5. 801
$30,850
A company has the following account balances. How much cash does the firm have assuming there are no other accounts? Inventory$22,500 Total Equity$98,800 Accounts Receivable$20,200 Fixed assets$78,300 Accounts payable$19,100 Long-term debt$34,000
$30,900 (Q31 on notes)
What is the opening value of one December futures contract on wheat? Contract open high. low. close Corn 5000bu, cents/bu 620.5. 623.5. 613 617 Wheat 5000bu cents/bu 750. 766. 745. 752
$37,500
Bay Marina, Inc., has net income of $153,700 and has 50,000 shares of stock outstanding. Similar firms have a price-earnings ratio of 15. Given this, what should the market price of Bay Marina, Inc., stock be per share?
$46.11 (Q30 on notes)
Southern Fields has an inventory of 838,000 pounds of sugar. The firm placed a partial hedge on this inventory by selling 6 futures contracts at 9.56. The futures contracts are based on 112,000 pounds and are quoted in cents per pound. At the time the firm sold the sugar, the spot rate was 9.63. How much profit did the firm lose because of the hedge?
$470.40 (Q16 on notes)
Rylee short sold 600 shares of stock at $16.25 a share. The initial margin is 75% and the maintenance margin is 50%. The stock is currently selling for $19.50 a share. What is Rylee's account equity at this time? Ignore margin interest.
$5,362.50 (Q3 in notes)
A firm has a price-cash flow ratio of 12.5 and a price-book value ratio of 7.6. If the cash flow per share is $4.67, what is the book value per share?
$7.68 (Q32 on notes)
The High Yield Money Market Fund returned 6.60% for the last year. Currently, you own 8,901.1 shares of this fund. If you invested in this fund one year ago, what was the amount of your original investment?
$8,350 (Q41 on notes)
What is the operating cash flow, given the following information? Net income$745 Depreciation$85 Issuance of new stock$35 Repayment of debt$35 Sale of old equipment$50 Purchase of new equipment$85 Dividend payments$80 Interest payments$90
$830 (745+85)
You just sold 1,200 shares of stock short at a price per share of $13.50. The initial margin requirement is 60% and the maintenance margin is 30%. What is your initial equity position?
$9,720 (Q6 in notes)
Wilson's Furniture is experiencing good growth so its management has decided to commence paying dividends starting next year. The first dividend will be $.50 a share with annual increases of 4 percent in the dividend amount. The discount rate is 10 percent. What will the value of this stock be four years from now?
$9.75
What is the investment cash flow, given the following information? Net income$600 Depreciation$70 Issuance of new stock$30 Repayment of long-term debt$20 Sale of old equipment$40 Purchase of new equipment$60 Dividend payments$70 Interest payments$100
-$20 40 - 60
What is the financing cash flow, given the following information? Net income$550 Depreciation$60 Issuance of new stock$25 Repayment of debt$30 Sale of old equipment$45 Purchase of new equipment$65 Dividend payments$70 Interest payments$100
-$75 25 - 30 - 70
Jefferson Mills stock produced returns of 14.8, 22.6, 5.9, and 9.7 percent, respectively, over the past four years. During those same years, U.S. Treasury bills returned 3.8, 4.6, 4.8, and 4.0 percent, respectively. What is the variance of the risk premiums on Jefferson Mills stock for these four years?
.00528 (Q1 in notes)
What is the price difference on a $100,000, 5-year Treasury note futures contract between the high and low prices? Express your answer in both standard bond quotes and as a dollar value. Round your answer to the nearest $1. Contract Open High Jun,5yr,Treasury Note. 112-06.875 112-12.75 Low Close 111-17.5. 111-250
0-27.25 and $852 (Q13 on notes)
Consider the following information on GDP and CPI for an economy over the last 3 years. Calculate nominal GDP growth for 2018. GDP CPI 2017 137.4. 246.5 2018 139.4 251.2 2019 141.8 257.0
1.46%
If the nominal GDP was reported at $196.3 billion and real GDP was reported at $193.4 billion, what was the inflation rate for the period?
1.5% (Q36 on notes)
Carter's Books, Inc., has net income of $75,000 and a plowback ratio of 80%. There are 30,000 shares of stock outstanding at a market price of $25.50 a share. What is the price-earnings ratio?
10.2 (Q26 on notes)
An index has a market value of $695,200 at the beginning of the period and $735,000 at the end of the period. If you want the beginning index value to be 100, what is the ending index value?
105.72 (Q10 on notes)
Allan purchased 500 shares of stock on margin for $31.75 a share and sold the shares five months later for $34.50 a share. The initial margin requirement was 65% and the maintenance margin was 30%. The interest rate on the margin loan was 8.5%. He received no dividend income. What was his holding period return?
11.46% (Q7 in notes)
Your $785,000 investment in Mexico gained 6%. If the exchange rate moves from 13.4 pesos per dollar to 12.5 per dollar over the period, what is your total return on this investment?
13.63% (Q37 on notes)
You invest $50,000 in Germany when the exchange rate is $1.35/€. Your investment gains 13%, and you subsequently exchange the euros back into dollars at a rate of $1.40/€. What is your total percentage return on this investment?
17.19% (Q34 on notes)
A price-weighted index consists of Stocks A, B, and C, which are priced at $38, $21, and $26 a share, respectively. The current index divisor is 2.7. What will the new index divisor be if Stock B undergoes a 3-for-1 stock split?
2.2553 (Q11 on notes)
Assume the CPI increases from 251.233 to 256.974 over the period. What is the inflation rate implied by this CPI change?
2.29% (Q40 on notes)
An analyst gathered the following year-end price level data for an economy. What is the economy's annual compounded inflation rate for 2014-2019? 2014 174 2018. 190.3 2019. 196.8
2.49% (196.7/174)^(1/5) - 1 (Q39 on notes)
L.B. Jay has net income of $38,000, total assets of $437,000, total liabilities of $208,000, and a price-book ratio of 3.8. There are 60,000 shares of stock outstanding. What is the firm's price-earnings ratio?
22.90 (Q22 on notes)
An index consists of the following securities. What is the value-weighted index return? Stock Shares Beg Price End Price T. 5000. 20. 28 Z 2000. 38. 40
25.00% (same as Q8 on notes)
Over the past four years, the common stock of Jess Electronics Co. produced annual returns of 7.2, 5.8, 11.2, and 13.6 percent, respectively. Treasury bills produced returns of 3.4, 3.3, 4.1, and 4.0 percent, respectively over the same period. What is the standard deviation of the risk premium on Jess Electronics Co. stock for this time period?
3.22% (Q2 in notes)
Green Recycling, Inc., has 150,000 shares of stock outstanding. The firm has total assets of $568,000 and total liabilities of $415,000. The firm's stock is selling for $31 a share. What is the price-book ratio?
30.4 (Q29 on notes)
Assume that the Federal Reserve injects $3.93 billion into the financial system. If the reserve requirement is 11%, what is the maximum increase in money supply (in billions) that may result?
35.73% (Q38 on notes)
The Watermelon Patch has a retention ratio of .75, dividends of $50,000, and total equity of $3.5 million. What is the firm's sustainable rate of growth?
4.29% (Q23 on notes)
Western Adventures has earnings per share of $2.30 and dividends per share of $1.25. The total equity of the firm is $850,000. There are 40,000 shares of stock outstanding. What is the sustainable rate of growth?
4.94% (Q18 on notes)
You have a portfolio which is comprised of 30% of Stock A and 70% of Stock B. What is the portfolio standard deviation? Economy Probability E(Ra) E(Rb) 30% 70% Boom .15 20% 14% Normal .75. 11% 9% Recession .10 -23% -5%
6.68% (Q43 on notes)
You have a portfolio which is comprised of 55% of Stock A and 45% of Stock B. What is the expected return on this portfolio? Economy Probability E(Ra) E(Rb) 55% 45% Boom .15 19% 12% Normal .65. 11% 7% Recession .20 -16% 1%
6.69% (Q44 on notes)
Children's Books, Inc., has net income of $50,000 and a plowback ratio of 80%. There are 22,000 shares of stock outstanding at a market price of $18.64 a share. What is the price-earnings ratio?
8.2 (Q28 on notes)
An index consists of the following securities. What is the value-weighted index return? Stock Shares Beg Price End Price C. 5000. 18. 22 K 7500. 12. 11 S 2000 32 36
8.4%
An index consists of the following securities and has an index divisor of 3.0. What is the price-weighted index return? Index Shares Beg Price End Price D. 1000. 26 32 E 4000. 30. 28 F 3000. 19 22
9.33% (Q9 on notes)
You currently own a stock portfolio that has a beta of 1.2. If you fully hedge your stock portfolio you will effectively change the portfolio's beta to which one of the following? A) 0 B) 1.2 C) 1.22 D) 1 / 1.2 E) 1
A) 0
Which one of the following will increase the current residual income of a firm? A) a decrease in the required return on the firm's equity B) an increase in required earnings C) a decrease in future earnings per share D) a decrease in the current earnings per share E) an increase in the firm's beginning book equity per share
A) a decrease in the required return on the firm's equity
Alexis is an individual investor. She purchases shares at the ________ price and sells at the ________ price. A) ask; bid B) bid; ask C) ask; average D) average; ask E) bid; average
A) ask; bid
To be considered liquid, a security must: A) be able to be sold quickly with little, if any, price concession. B) be held for less than one year. C) pay dividends. D) be held in a cash account. E) be able to be purchased on short notice.
A) be able to be sold quickly with little, if any, price concession.
Hi-Tek Shoes is a private firm that has decided to issue shares of stock to the general public. This stock issue will be referred to as a(n): A) initial public offering. B) break-out issue. C) public service offering. D) open-end sale. E) initial trial issue.
A) initial public offering.
Which one of the following is NOT a financing cash flow according to standard accounting practice? A) interest payments B) dividend payments C) new issue of stock D) repurchase of stock E) new issue of debt
A) interest payments
The minimum equity that must be maintained at all times in a margin account is called the: A) maintenance margin. B) initial margin. C) call requirement. D) margin call. E) initial equity position.
A) maintenance margin.
Which one of the following is generally used as the basis for computing the cash flow per share? A) operating cash flow B) investment cash flow C) net cash increase D) financing cash flow E) retained cash earnings
A) operating cash flow
A preliminary document provided to investors who are interested in a stock offering is called a(n): A) red herring B) draft offer. C) inquiry form. D) green shoe. E) prospectus.
A) red herring
The rate of return earned on a U.S. Treasury bill is frequently used as a proxy for the: A) risk-free rate. B) expected rate of return. C) risk premium. D) deflated rate of return. E) market rate of return.
A) risk-free rate.
Which one of the following will increase the investment cash flow? A) sale of a building B) repaying a bond issue C) payment of interest on a bond issue D) purchase of a fixed asset E) issuing new shares of stock
A) sale of a building
Kay just purchased $5,000 worth of stock. She paid $3,000 in cash and borrowed $2,000. In this example, the term margin refers to: A) the percentage of the purchase that was paid in cash. B) any future decrease in the value of the stock. C) the total amount of the purchase. D) the percentage of the purchase paid with borrowed funds. E) any future increase in the value of the stock.
A) the percentage of the purchase that was paid in cash.
The risk-free rate is: A) the rate of return on a riskless investment. B) defined as the increase in the value of a share of stock over time. C) defined as the total of the capital gains yield plus the dividend yield. D) the rate of return earned on an investment in a firm that you personally own. E) another term for the dividend yield.
A) the rate of return on a riskless investment.
The standard deviation is a measure of: A) volatility. B) capital gains. C) changes in dividend yields. D) total return. E) changes in the capital gains rate.
A) volatility.
The spot price on cocoa is $3,840 a ton. The futures price is $3,450 a ton. The basis is ________ and the market is a(n) ________ market. A) −390; carrying-charge B) 390; inverted C) −390; inverted D) 60; inverted E) 390; carrying-charge
B) 390; inverted (Q12 on notes)
The absolute minimum initial margin requirement is set by the: A) Security Investors Protection Corporation. B) Federal Reserve. C) brokerage firm. D) Securities and Exchange Commission. E) individual investor.
B) Federal Reserve.
Which one of the following statements about efficient portfolios is correct? A) There is only one efficient portfolio that can be constructed using two securities. B) There are multiple efficient portfolios that can be constructed using the same two securities. C) Any efficient portfolio will lie below the minimum variance portfolio when the expected portfolio return is plotted against the portfolio standard deviation. D) An efficient portfolio will have the lowest standard deviation of any portfolio consisting of the same two securities. E) Any portfolio mix consisting of only two securities will be an efficient portfolio.
B) There are multiple efficient portfolios that can be constructed using the same two securities.
Which one of the following prices will an individual investor receive if he or she sells shares of Intel? A) ask B) bid C) offer D) issue E) Dutch
B) bid
A time-stamped ledger of electronic transactions among multiple users, but with no centralized control, is referred to as a(n): A) coin B) blockchain C) token. D) chainsaw. E) decentralized network.
B) blockchain
Which one of the following is the primary difference between operating cash flow and net income? A) indirect costs B) depreciation C) interest expense D) fixed costs E) taxes
B) depreciation
Watson lives in State A and owns a municipal bond issued by State B. The interest earned on this bond is most likely to be exempt from taxation at which of the following levels? A) local only B) federal only C) state only D) federal, state, and local E) local and state only
B) federal only
Which one of the following is the cash flow resulting from the payment of dividends and the issuance or repurchase of equity securities? A) balance sheet cash flow B) financing cash flow C) business cash flow D) investment cash flow E) operating cash flow
B) financing cash flow
Sam purchased 500 shares of Microsoft stock which he has pledged to his broker as collateral for the loan in his margin account. This process of pledging securities is called: A) margin calling. B) hypothecation. C) maintaining the margin. D) street securitization. E) leveraging.
B) hypothecation.
Which one of the following terms is defined as the strategy of monitoring the futures price on a stock index in relation to the value of the underlying index to profit from any parity deviations? A) inverted arbitrage B) index arbitrage C) parity trading D) index trading E) program monitoring
B) index arbitrage
Which one of the following is NOT included in the calculation of operating income? A) other operating expenses B) interest expense C) cost of goods sold D) depreciation E) sales
B) interest expense
A decrease in which one of the following will increase the return on assets? A) long-term debt B) inventory C) retained earnings D) dividends paid E) sales
B) inventory
A firm that specializes in arranging financing for companies is called a(n): A) floor broker B) investment banking firm C) private broker D) marketing firm E) investment dealer
B) investment banking firm
Which one of the following models can be used to value the stock of a firm that maintains a one hundred percent retention ratio? A) supernormal growth B) residual income C) perpetual cash flow D) two-stage growth E) perpetual dividend growth
B) residual income
The profit a dealer makes on a purchase and resale of shares of stock is called the: A) bid. B) spread. C) float. D) offer. E) margin.
B) spread.
Which of the following is NOT one of Porter's five forces? A) bargaining power of suppliers B) threat of new technology C) threat of substitute products D) threat of new entrants E) bargaining power of buyers
B) threat of new technology
The process of purchasing newly issued shares from the issuer and reselling those shares to the general public is called: A) capitalizing. B) underwriting. C) securing. D) brokering. E) deploying.
B) underwriting.
Which one of the following is generally true concerning securities held in street name? A) There is a greater likelihood the security may be stolen. B) The securities are registered under your mailing address rather than your name. C) The brokerage firm is the owner of record. D) The annual stock report is mailed directly to your street address. E) All dividend checks are mailed to your street address.
C) The brokerage firm is the owner of record.
How is a futures contract on the S&P 500 index settled? A) delivery of a Treasury bill equal in value to the settlement amount B) shares of stock equivalent to those in the index C) cash D) shares of stock selected by the contract buyer E) shares of stock selected by the contract seller
C) cash
Which type of economic sectors has a low sensitivity to the business cycle? A) cyclical B) leading C) defensive D) lagging E) offensive
C) defensive
You are graphing the investment opportunity set for a portfolio of two securities with the expected return on the vertical axis and the standard deviation on the horizontal axis. If the correlation coefficient of the two securities is +1, the opportunity set will appear as which one of the following shapes? A) horizontal line B) conical shape C) linear with an upward slope D) combination of two straight lines E) hyperbole
C) linear with an upward slope
Return on equity is equal to which one of the following? A) dividend yield divided by total equity B) retained earnings divided by total equity C) net income divided by total equity D) operating cash flow divided by total equity E) revenue divided by total equity
C) net income divided by total equity
The document that must be prepared in order to receive approval for a stock offering is called a(n): A) offering paper. B) tombstone. C) prospectus D) regulatory report E) offering agreement
C) prospectus
Which of the following is NOT a threat of new entrants according to Porter's five forces? A) capital requirements B) economies of scale C) quality of substitutes D) government policies E) product differentiation
C) quality of substitutes
Which one of the following is NOT one of the elements in the industry life cycle? A) maturity B) start-up C) rapid decline D) relative decline E) consolidation
C) rapid decline
What is a method for valuing stock in a company that does not pay dividends? A) payout-retention model B) no-dividend valuation method C) residual income model D) clean surplus relationship E) economic value added
C) residual income model
Which one of the following is equal to net income expressed as a percentage of total assets? A) return on the balance sheet B) net yield C) return on assets D) operating yield E) return on equity
C) return on assets
When a group of underwriters jointly works together to sell a new issue of securities, the underwriters form a(n): A) market union. B) venture capital association. C) syndicate D) underwriting cartel. E) Dutch market.
C) syndicate
A 12b-1 fee is a fee charged by a mutual fund: A) to cover trading costs. B) if shares are sold within a stated period of time. C) to cover marketing costs. D) to pay the fund's managers. E) at the time shares are issued.
C) to cover marketing costs.
The spot price on cocoa is $3,100 a ton. The futures price is $3,180 a ton. The basis is ________ and the market is a(n) ________ market. A) 80; carrying-charge B) −60; inverted C) −80; carrying-charge D) −80; inverted E) 80; inverted
C) −80; carrying-charge
Which one of the following can be assumed when the SEC approves an IPO registration? A) The stock price is set at a level which will allow shareholders to earn a positive rate of return. B) The securities offering will provide value to the shareholders. C) The issuer is financially sound. D) All rules have been followed to allow for full disclosure of information. E) The issuer will remain solvent.
D) All rules have been followed to allow for full disclosure of information.
Which one of the following statements is correct? A) Pretax income is equal to gross profit minus interest expense. B) Gross profit is equal to sales minus costs of goods sold and depreciation. C) Costs that vary directly with production are classified as operating expenses. D) Operating expenses are indirect costs. E) The change in retained earnings is equal to net income plus dividends paid.
D) Operating expenses are indirect costs.
Which one of the following statements concerning venture capital is correct? A) Most venture capitalists are passive investors. B) Venture capitalists generally compete with banks to find projects to finance. C) Well established firms tend to absorb most of the available venture capital. D) Venture capital is frequently provided in stages with each stage financed by a different venture capitalist. E) The founders of a firm generally realize substantial payoffs as soon as the firm receives venture financing.
D) Venture capital is frequently provided in stages with each stage financed by a different venture capitalist.
Which type of economic sectors has a high sensitivity to the business cycle? A) offensive B) defensive C) leading D) cyclical E) lagging
D) cyclical
Net income is equal to which one of the following? A) pretax income plus income taxes B) gross profit minus depreciation and interest expense C) pretax income minus taxes and dividends D) dividends plus the change in retained earnings E) operating income plus interest expense minus taxes
D) dividends plus the change in retained earnings
A fee that is charged at the time mutual fund shares are purchased by an investor is called a: A) 12b-1 fee. B) contingent deferred sales charge. C) issuance charge. D) front-end load. E) back-end load.
D) front-end load.
Wilson's Clothing has a loan payable to a bank which is due 18 months from now. How is this loan classified on the firm's financial statements? A) fixed asset B) expense C) equity D) long-term debt E) current liability
D) long-term debt
Shares in closed-end funds: A) cannot be resold. B) are more popular than shares in open-end funds. C) can be resold to the fund at any time. D) may sell for more or less than the NAV E) are referred to as mutual fund shares.
D) may sell for more or less than the NAV
Bright Detergent is issuing new shares of stock that will trade on NASDAQ. If Sally purchases 300 of these shares, the trade will occur in which one of the following markets? A) fourth B) secondary C) third D) primary E) over-the-counter
D) primary
To qualify for an initial listing on the NYSE (per our class handout), a US-based firm must have at least: A) 2.5 million shares held by the public. B) 100,000 shares traded on an average day. C) 5,000 shareholders. D) Adjusted Pre-Tax Aggregate earnings of $100 million over the previous 3 fiscal years. E) Adjusted Pre-Tax Aggregate earnings of $10 million over the previous 3 fiscal years.
E) Adjusted Pre-Tax Aggregate earnings of $10 million over the previous 3 fiscal years.
Which one of the following decisions falls under the category of asset allocation? A) Deciding to actively analyze individual securities B) Deciding to use an online broker C) Purchasing Ford stock rather than General Motors stock D) Adopting a passive investment strategy E) Determining that thirty percent of a portfolio should be invested in bonds
E) Determining that thirty percent of a portfolio should be invested in bonds
Which one of the following is the federal agency that regulates the financial markets in the U.S.? A) Federal Reserve B) National Association of Securities Dealers C) Over the Counter Commission D) Treasury Department E) Securities and Exchange Commission
E) Securities and Exchange Commission
Which one of the following statements related to book value per share (BVPS) is correct? A) The payment of a dividend increases BVPS. B) BVPS is equal to total assets divided by the number of shares outstanding. C) An increase in the market value of a firm's fixed assets will increase the firm's BVPS. D) BVPS is equal to the market price of a share of stock. E) The issuance of new shares at market value may increase the BVPS.
E) The issuance of new shares at market value may increase the BVPS.
The financing provided for new ventures that are frequently high-risk investments is referred to as "venture ________". A) leverage B) risk funds C) funding D) investing E) capital
E) capital
Operating cash flow is referred to as which one of the following? A) pretax income B) revenue minus expenses C) cash flow originating from the issuance of securities D) cash realized from the sale of assets E) cash generated by a firm's normal business activities
E) cash generated by a firm's normal business activities
When the seller of a futures contract is granted a choice among various assets to deliver, the seller is said to have which one of the following options? A) spot or futures option B) right-to-choose option C) mark-to-market option D) flexible delivery option E) cheapest-to-deliver option
E) cheapest-to-deliver option
A fund that is basically an index fund that trades like a closed-end fund is called a(n): A) mutual fund. B) depository receipt. C) money market fund. D) open-end fund. E) exchange-traded fund.
E) exchange-traded fund.
You own a diversified investment portfolio and wish to hedge it against market declines. Which one of the following would be best suited as a cross-hedge for this purpose? A) going long on DJIA futures B) going long on Treasury bonds in the spot market C) going long on an index fund D) going short on Eurodollar futures E) going short on S&P 500 index futures
E) going short on S&P 500 index futures
Sander's Auto recently purchased Auto Express for $9.8 million. Auto Express had a market value of $9.5 million at the time of acquisition. The additional $.3 million that Sander's Auto paid for Auto Express will be treated on Sander's Auto's balance sheet as which type of account? A) acquisition expense B) depreciation C) licenses D) patent E) goodwill
E) goodwill
When your equity position in a security is less than the required amount, your brokerage firm will issue a: A) leverage call. B) limit order. C) cash certificate. D) margin certificate. E) margin call.
E) margin call.
An investor who follows a fully active strategy will: A) maintain a relatively constant mix of asset classes while continually buying and selling individual securities. B) move money between asset classes but will not be concerned about which individual securities are owned. C) focus on picking individual stocks only. D) concentrate solely on asset allocation to maximize potential returns. E) move money between asset classes as well as try to select the best performers in each class.
E) move money between asset classes as well as try to select the best performers in each class.
Income and expense items NOT realized in cash form are referred to as which one of the following? A) intangible assets B) financing activities C) deductible expenses D) operating income E) noncash items
E) noncash items
What are the restrictions on investment portfolios that require that all securities held within the portfolio meet a specified level of safety called? A) risk ranges B) safety monitors C) protective covenants D) negative restrictions E) prudent investment guidelines
E) prudent investment guidelines
The process of moving investments between sectors of the economy over time is called ________. A) sector selection B) sector swapping C) sector stagnation D) sector exchange E) rotational investing
E) rotational investing
Wilson just placed an order with his broker to purchase 500 of the outstanding shares of GE. This purchase will occur in which one of the following markets? A) third B) fourth C) primary D) fifth E) secondary
E) secondary
A securities dealer is a(n): A) person who buys securities for his or her own account on an exchange floor. B) firm which charges a commission for arranging a transaction. C) intermediary who arranges trades between a buyer and a seller. D) trader who transacts business on behalf of a securities issuer. E) trader who buys and sells from his or her inventory.
E) trader who buys and sells from his or her inventory.
The free cash flow model: I. can be used to value a company with negative earnings. II. is based on a firm having positive cash flows. III. requires that a firm pay a dividend. IV. directly estimates a value of a firm's equity.
I and II only
Which of the following are current assets? I. inventory II. goodwill III. fixed assets IV. cash
I and IV only inventory cash
Which of the following are affected by the probability of a state of the economy occurring? I. expected return of an individual security II. expected return of a portfolio III. standard deviation of an individual security IV. standard deviation of a portfolio
I, II, III, and IV ALL OF THE ABOVE
Which of the following are commonly examined during the process of a fundamental analysis? I. sales II. book value III. earnings per share IV. cash flow
I, II, III, and IV ALL OF THE ABOVE
Which of the following have the same meanings as the term "economic value added"? I. abnormal earnings II. residual income III. value created by a firm over a period of time IV. EPSt − Bt-1 × k
I, II, III, and IV ALL OF THE ABOVE
Which of the following can you do with an ETF that you cannot do with an open-end fund? I. sell at mid-day prices II. short sell III. buy options on them IV. resell
I, II, and III sell at mid-day prices short sell buy options on them
Which of the following affect the expected rate of return for a portfolio? I. weight of each security held in the portfolio II. the probability of various economic states occurring III. the variance of each individual security IV. the expected rate of return of each security given each economic state
I, II, and IV only
Which of the following are common sources of venture capital? I. private individuals II. NASDAQ III. university endowment funds IV. insurance companies
I, III, and IV private individuals university endowment funds insurance companies
Assume a mutual fund is a pure no-load fund. Which of the following costs should an investor still expect to incur? I. contingent deferred sales charge II. management fee III. trading costs IV. redemption fee
II and III only management fee trading costs
Which of the following are classified as equity accounts on a balance sheet? I. goodwill II. paid in capital III. net income IV. retained earnings
II and IV only paid in capital retained earnings
Southern Fuel has an inventory of 756,000 gallons of heating oil. The futures contracts on heating oil are based on 42,000 gallons. If the firm wishes to fully hedge its inventory, it should take which one of the following positions in heating oil futures contracts?
short on 18 (Q17 on notes)
You purchased seven September wheat futures contracts at the open today and sold those contracts at the close. What is your total profit or loss on these contracts? Contract open high. low. close Corn 5000bu, cents/bu 615.5. 618.25. 608 612.5 Wheat 5000bu cents/bu 814. 820. 808.5. 811
−$1,050 (Q14 on notes)
An index consists of the following securities. What is the value-weighted index return? Stock Shares Beg Price End Price C. 1000. 32. 38 K 4000. 22. 23 S 6000 57 55
−.43% (Q8 on notes)
