finance self checks

Operating leases often have terms that include: a. full amortization over the life of the lease. b. very high penalties if the lease is cancelled. c. restrictions on how much the leased property can be used. d. much longer lease periods than for most financial leases. e. maintenance of the equipment by the lessor.

. maintenance of the equipment by the lessor.

Which of the following bank accounts has the lowest effective annual rate? The one that pays: a. 8% stated interest with monthly compounding. b. 7% stated interest with monthly compounding. c. 8% stated interest with annual compounding. d. 7% stated interest with daily compounding. e. 8% stated interest with daily compounding.

7% stated with monthly compounding

Which of the following statements is most CORRECT? A zero coupon bond's current yield is equal to its yield to maturity. If a bond's yield to maturity exceeds its coupon rate, the bond will sell at par. All else equal, if a bond's yield to maturity increases, its price will fall. If a bond's yield to maturity exceeds its coupon rate, the bond will sell at a premium over par. All else equal, if a bond's yield to maturity increases, its current yield will fall.

All else equal, if a bond's yield to maturity increases, its price will fall.

Which of the following statements is most CORRECT? All else equal, high-coupon bonds have less reinvestment rate risk than low-coupon bonds. All else equal, long-term bonds have less interest rate price risk than short-term bonds. All else equal, low-coupon bonds have less interest rate price risk than high-coupon bonds. All else equal, short-term bonds have less reinvestment rate risk than long-term bonds. All else equal, long-term bonds have less reinvestment rate risk than short-term bonds.

All else equal, long-term bonds have less reinvestment rate risk than short-term bonds.

Two constant growth stocks are in equilibrium, have the same price, and have the same required rate of return. Which of the following statements is CORRECT? The two stocks must have the same dividend per share. If one stock has a higher dividend yield, it must also have a lower dividend growth rate. If one stock has a higher dividend yield, it must also have a higher dividend growth rate. The two stocks must have the same dividend growth rate. The two stocks must have the same dividend yield.

If one stock has a higher dividend yield, it must also have a lower dividend growth rate.

Which of the following statements is most CORRECT? If your uncle earns a return higher than the overall stock market, this means the stock market is inefficient. If your uncle has information about past stock prices, he should be able to profit from this information in a weak-form efficient market. If your uncle has insider information about a publicly traded company, he should be able to profit from this information in a strong-form efficient market. If your uncle has information from an article in the Wall Street Journal, he should be able to profit from this information in a semi-strong form efficient market. None of the answers above is correct.

None of the answers above is correct.

When a person buys health insurance because he has a risky lifestyle that is not known to the health insurance company, this is called: a. Adverse selection b. Moral hazard c. Risk transfer d. Indemnification e. Bracketology

adverse selection

Which of the following could result in an increase in a primary care PMPM? a. Increase in the average number of PCP visits provided per enrollee b. Decrease in the average number of visits supplied per PCP c. Increase in average PCP compensation d. All of the above e. None of the above

all of the above

Inflation, recession, and high interest rates are economic events that are best described as: Systematic risk factors that can be diversified away. Company-specific risk factors that can be diversified away. Among the factors that are responsible for market risk. Risks that are beyond the control of investors and thus should not be considered by security analysts or portfolio managers. Irrelevant except to governmental authorities like the Federal Reserve.

among the factors responsible for market risk

The US tax system favors equity over debt financing. t/f

false

Leasing is often preferable to buying because: it has no effect on the firm's ability to borrow to make other investments. generally, no down payment is required, and there are no indirect interest costs. lease obligations do not affect the firm's risk as seen by investors. the lessee owns the property at the end of the lease term. the lessee may have greater flexibility in abandoning the project

greater flexibility in abandoning the project

Which statement is correct? a. Starting to invest early for retirement reduces the benefits of compound interest. b. Time lines cannot be constructed in situations where some of the cash flows occur annually but others occur quarterly. c. If the discount (or interest) rate is positive, the FV of an expected series of payments will always exceed the PV of the same series. d. If money has time value, it is impossible for the FV of a given sum to exceed its PV. e. The PV of a future sum increases as either the discount rate or the number of periods per year increases, other things held constant.

if the discount or interest rate is positive, the FV of an expected series of payments will always exceed the PV of the same series

Which of the following measures are typically not used by P4P programs? a. Outcome b. Process c. Provider satisfaction d. Structural e. Productivity

provider satisfaction

You have decided to borrow and buy an asset. Which of the following might make you change your mind and lease the asset, all else the same: a. Loan interest rate decreases. b. Tax rate of lessor decreases. c. Maintenance expense decreases. d. Residual value decreases. e. Risk of residual value decreases.

residual value decreases

Which of the following statements is most CORRECT? Only investor-owned corporations can retain earnings. Charitable contributions to investor-owned corporations are tax-deductible. Restricted charitable contributions can only be used for the designated purpose. Only not-for-profit corporations can qualify for government grants. Equity in a not-for-profit corporation is called "fund capital" while equity in an investor-owned corporation is called "net assets."

restricted charitable contributions can only be used for the designated purpose

Which statement is correct? Risk-averse investors require higher rates of return on investments whose returns are highly certain, and most investors are risk averse. The coefficient of variation, calculated as the standard deviation of expected returns divided by the expected return, is a standardized measure of the risk per unit of expected return. The standard deviation is a better measure of risk than the coefficient of variation if the expected returns of the securities being compared differ significantly. The tighter the probability distribution of its expected future returns, the greater the risk of a given investment as measured by its standard deviation. The greater the probability of a return far below that anticipated, the lower the risk.

the coefficient of variation, calculated as the standard deviation of the ERR divided by the ERR is a standardized measure of the risk per unity of expected return

A $50,000 loan is to be amortized over 7 years, with annual end-of-year payments. Which of these statements is CORRECT? The annual payments would be larger if the interest rate were lower. If the loan were amortized over 10 years rather than 7 years, and if the interest rate were the same in either case, the first payment would include more dollars of interest under the 7-year amortization plan. The proportion of each payment that is interest as opposed to repayment of principal would be lower if the interest rate were lower. The last payment would have a higher proportion of interest than the first payment. The proportion of interest versus principal repayment would be the same for each of the 7 payments.

the proportion of each payment that is interest as opposed to repayment of Principle would be lower if IR is lower

Which of the following statements is most CORRECT? The rate of interest on short-term Treasury securities is a better proxy for the risk-free rate than the rate of interest on long-term Treasury securities. Liquidity premiums are generally higher on Treasury than corporate bonds. Price risk premiums are due primarily to the fact that the probability of default is higher on long-term bonds than on short-term bonds. Default risk premiums are generally lower on corporate than on Treasury bonds. Other things held constant, a callable bond has a lower required rate of return than a noncallable bond.

the rate of interest on short term treasury securities is a better proxy for the risk free rate than the rate of interest on long term treasury securities

Providers may have to be more transparent about their prices in a market where many patients have consumer-directed health plans. True False

tru

Capitation can reduce days in accounts receivable. True False

true

The exemption of municipal bonds from federal taxes allows not-for-profit healthcare providers to borrow at lower interest rates than otherwise would be possible. t/f

true

If a business sells an asset for more than its tax book value, then the firm: a. Took too little depreciation. b. Will increase its taxable income. c. Will reduce its taxable income. d. Calculated depreciation incorrectly. e. Had Al Capone as its CPA.

will increase taxable income