FINA5501SampleQuizQuestions

1. Whenacorporationissueslongtermdebtinordertoraisemoneytopayfortheacquisition ofrealassets,ithasmadea: a) Dividendpolicy/payout b) Financingdecision c) Capitalbudgetingorinvestmentdecision d) Moneymarketdecision

Ans:B 2. Whichofthefollowingisananswerto"Whatarethemaindutiesofafinancialmanager?" I. II. III. IV Ans:C 3. Ans:B 4. Decidinghowmuchinteresttopaytheholdersofthecorporation'sbonds. Decidingthemixoflongtermdebtandequity. Decidingwhichprojectsafirmshouldundertake. Decidinghowmanycustomersthefirmshouldhaveinordertomaximizevaluefor shareholders IandIIonly I,II,andIIIonly IIandIIIonly II,III,andIVonly I,II,III,andIV

A) B) C) D) E)

Thepurchaseandsaleofsecuritiesaftertheoriginalissuanceoccursinthe: A) Primarymarket. B) Secondarymarket. C) Dealermarket. D) Auctionmarket. E) Liquidationmarket.

Capitalstructurereferstowhichofthefollowingissues? I. Fromwhomshouldthefirmborrowfunds? II. Howmuchdebtshouldthefirmhaveinrelationtoitslevelofequity? III. Whatlevelofcurrentassetsisrequiredtomaintainthefirm'soperationallevel? IV Howmuchriskisassociatedwiththefuturecashflowsofaproject? A) B) C) D) E) IIonly IIIonly IandIIonly I,II,andIIIonly I,II,andIVonly

Ans:A

5. Nealwantstoborrow$2,500andhasreceivedthefollowingoffersfromhislocalbanks.Which offershouldNealacceptifhewantstorepaytheloaninonesinglepaymenttwoyearsfromnow? A) BankA,whichoffersasimplerateof4%. B) BankB,whichoffersasimplerateof5%. C) BankC,whichoffersarateof4%compoundedannually. D) BankD,whichoffersarateof5%compoundedannually. E) BankE,whichoffersarateof5%compoundedmonthly. Ans:A 6. Jamiedeposits$1,000intoanaccountthatpays4percentinterestcompoundedannually.Chris deposits$1,000intoanaccountthatpays4percentsimpleinterest.Bothdepositsweremade today.Whichofthefollowingstatementsaretrueconcerningthesetwoaccounts? I. Attheendofoneyear,bothJamieandChriswillhavethesameamountintheiraccounts. II. Attheendoffiveyears,ChriswillhavemoremoneyinhisaccountthanJamiehasinhers. III. Chriswillneverearnanyinterestoninterest. IV. Allelseequal,Jamiemadethebetterinvestment. A) IandIIonly B) IIIandIVonly C) I,II,andIVonly D) I,III,andIVonly E) II,III,andIVonly Ans:D

7. a) b) c) d)
Ans:C

Otherthingsbeingequal,themorefrequentthecompoundingperiod,the: highertheannualpercentagerate lowertheannualpercentagerate highertheeffectiveannualinterestrate lowertheeffectiveannualinterestrate

8. Theprimarygoalofacorporatemanagementshouldbeto: a) Maximizethenumberofshareholders b) Maximizethefirmsrevenue c) Minimizethefirmscost d) Maximizetheshareholderswealth Ans:D 9. The3majordecisionsmanagersmakeare: a) Hiring,Financing,andinvestmentdecisions b) Capitalbudgeting,financing,andpayout/reinvestmentdecision c) Capitalbudgeting,Investment,andfinancing d) Informationtechnology,investmentsandhiringdecisions Ans:B