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QUESTIONS. BSA 3-5D Hide Details From Roshan Dalapu To mhonji@yahoo.com

Sent from my iPhone Begin forwarded message: From: Roshan Dalapu <roshandalapu@gmail.com> Date: January 13, 2013 7:41:11 PM GMT+08:00 To: jaymarkfabellacpa@yahoo.com, Roshan Dalapu <roshandalapu@gmail.com> Subject: FINMAN QUESTIONS. BSA 3-5D Alyssa Adzuara Which of the following is true : a.Higher the beta, lower the risk b.Higher the beta , higher the risk c.Risk is constant d.Beta is constant ans: B Kim Jonas Canuel Which of the following statements regarding motivation for a stock repurchase is wrong? A. Firms could be privatized using stock repurchases. B. Investors consider a firms stock overvalued when a stock repurchase occurs. C. Firms use stock repurchase to move capital structure back to some optimum level. D. Stock repurchases are sometimes used to satisfy dissident shareholders. Solution: B Kim Harvey carandang Systematic risk can be measured by : a.Coefficient of variation b.Standard deviation c.Beta d.Range ans: C Kate Louise Carolino Which of the following statements is most correct? (Assume that the risk-freerate remains constant.) a.If the market risk premium increases by 1 percentage point, then therequired return on all stocks will rise by 1 percentage point. b.If the market risk premium increases by 1 percentage point, then therequired return will increase for stocks that have a beta greater than1.0, but it will decrease for stocks that have a

beta less than 1.0. c.If the market risk premium increases by 1 percentage point, then therequired return will increase by 1 percentage point for a stock that has abeta equal to 1.0. d.Statements a and c are correct.e.None of the statements above is correct ans: C Diana Jane Cudia The constant growth dividend model uses the: a. b. c. d. ans: C Roshan Dalapu Maturity constant, increases in interest rates ___ bond prices by proportionately __ amounts than decreases in rates ___ bond prices. a. b. c. d. ans: B Maryeann Del Barrio A downward sloping yield curve that indicates generally cheaper short-term borrowing costs than long term borrowing cost a. normal yield curve b. flat yield curve c. inverted yield curve d. parallel yield curve ans: C Camille Dela Cruz When there is greater degree of risk aversion, the slope in the SML is A. PARALLEL B. NONPARALLEL C. STEEPER D. FLAT Patricia Anne Dela Rosa Pole Company/s common stock is currently selling at Php24 per share. The company recently paid dividends of 1.92 per share and projects growth at a rate of 4%. At this rate, what is the stock's expectedrate of return? a. 8% increase . . . smaller . . . increase decrease . . . smaller . . . increase decrease . . . larger . . . increase increase . . . larger . . . decrease historical growth rate in dividends. historical growth rate in earnings. estimated growth rate in dividends. estimated growth rate in earnings

b. 12% c. 8.80% d.4.08% ans: B Sharlene Diaz The less certain a cash flow, the _____ the risk, and the ____ the value of the cash flow. ans: HIGHER; LOWER Jericko Paul Domingo What is the expected market return if expected return on asset y is 9%, its beta is 2 & the risk free rate is 6%? ans: 7.5% Marian Katleen Doong Yvette Anne Galang The repurchase of common stock results in a type of _____. a. Stock Split b. reverse dullution c. dividend policy d. clientele effect ans: B Jhedilyn Garrovillas Stock X has a beta of 0.5 and Stock Y has a beta of 1.5. Which of thefollowing statements is most correct? a.Stock Ys return this year will be higher than Stock Xs return. b.Stock Ys return has a higher standard deviation than Stock X. c.If expected inflation increases (but the market risk premium isunchanged), the required returns on the two stocks will increase by thesame amount. d.If the market risk premium declines (leaving the risk-free rateunchanged), Stock X will have a larger decline in its required return thanwill Stock Y.e.If you invest $50,000 in Stock X and $50,000 in Stock Y, your portfoliowill have a beta less than 1.0, provided the stock returns on the twostocks are not perfectly correlated. ans: C Seana Marie Gayanes Basic objective of diversification is : a. Increasing return b. Increasing risk c. Decreasing risk d. Maximizing return

ans: C Lawrence Hofilea In order to reduce the overall risk, it is best to combine or add to the portfolio the assets that have ___. a. positive correlation b. negative correlation c. no correlation d. all of the above ans: B Mary Anne Lacaron The ff. are the similarities of share dividends and share splits except: a. share outstanding increase b. retained earnings decrease c. shareholders's equity remains the same d. cash is not paid ans: B Anjanelle Lagrimas Jones design wishes to estimate the value of iys outstanding preferred stock. The preferred issue has an Php 80 par value and pays annual dividend of Php 6.4 per share. similar risk-preferred stocks are currently earning a 9.3% annual rate of return. What is the outstanding preferred stock? ans: Php 68.82 Ma. Theresa Lualhati Last year you bought 100 shares of Aple Corp. common stock for Php 53 per share. During the year he received dividends of Php 1.45 per share. What rate of return did you earn over the year? a. 11.7% b. 13.2% c. 14.1% d. 15.9% ans: D Grace Magnaye What is the estimated value of a stock with a required rate of return of 15 percent, a projected constant growth rate of dividends of 10 percent and expected dividend of $2.00 . a. $4 b. $40 c. $44

d. ans: B Mabel Miguel

$20

ABC'c stock is currently selling for Php 160.00 per share and the firm's dividends are expected to grow at 5% indefinitely. Assuming ABC's most recent dividend was 5.50, what is the required return on ABC's stock? ans: 8.6% Jessa Mona In the capital asset pricing model, the general risk preference of investors in the market place are reflected by a. the risk-free rate b. the slope of the security market line c. the level of the security market line d. the difference between the security market line and the risk-free rate ans: B Ericka Navidad The following affects the approximate approach for calculating yield-to-maturity, except a. maturity value b. annual interest c. risk-free security d. market value ans: C Kristel Ortiz In all theories of term structure, the slope of the yield curve is affected by except: a. inflationary expectations b. efficient markets c. liquidity preferences d. market segments ans: B Sharmaine Pagulayan Which of the following statements is most correct? a. the constant-growth model takes into consideration the capital gains earned on a stock. b. Two firms with the same growth and dividend rate must also have the same stock price c. It is appropriate to use the constant-growth model to estimate stock values even if the growth rate never becomes constant d. Statements A and B are correct

ans: A Alexis Nicolie Reyes Dividend Policy is a form of _____. ans: Financing Policy John Paul Rojas Trendy Corp. recently declared a 10% stock divided. As of the date of the announcement, Trendy had 10 million shares outstanding which were selling on the PSE for Php 50 per share. An accounting entry is required on the balance sheet in order to transfer an amount from the retained earnings to the common stock and additional paid in capital accounts. What is the dollar amount of retained earnings to the common stock as rthe result of the stock dividend? assume that the par value of trendy is Php 2 per share. a. 6 million b. 5 million c. 4 million d. 2 million ans: D Dandheluce Rosales Which theory of term structure of interest rates suggests that for any given issues, long term interest rates tend to be higher than short term rates? a. Expectation theory b. Liquidity preference theory c. Market segmentation theory d. Bond indenture theory ans: B Rocherr Salido A corporate type of bond that is commonly used during the 1980's by rapidly growing firms to obtain growth capital. These are high-risk bonds with high-yiels- often yielding 2% to 3% more than the best quality corporate debt a. extendible notes. b. zero-coupon bonds c. junk bonds d. putable bonds ans: C Alger Royd Salise

When the required return is constant and equal to the coupon rate, the price of a bond as it approaches its maturity date will a. remain constant b. increase c. decrease d. change depending on whether it is a discount or premium bond ans: A Ivy Sangel The real utility of the coefficient of variation comes in comparing the risks of assets that have different ____> a. correlation b. standard deviation c. expected returns d. returns ans: C Jane Sanopo An 8 percent preferred stock with a market price of P110 per share and a P100 par value pays a cash dividend of _____________. a.P4.00 b.P8.00 c.P8.80 d.P80.00 ANSWER: B Zion Zipagan In the years ahead the market risk premium, (kM- kRF), is expected to fall,while the risk-free rate, kRF, is expected to remain at current levels. Giventhis forecast, which of the following statements is most correct? a.The required return for all stocks will fall by the same amount. b.The required return will fall for all stocks but will fall more for stockswith higher betas. c.The required return will fall for all stocks but will fall less for stockswith higher betas. d.The required return will increase for stocks with a beta less than 1.0 andwill decrease for stocks with a beta greater than 1.0.e.The required return on all stocks will remain unchanged. ans: D