A collection of assets held by an investor is called

1.corporate bond

2.random returns

3.risk premium

4.portfolio

According to residual dividend policy, a firm should pay a dividend of all left over when

1.zero NPV projects have been funded

2.positive NPV projects have been funded

3.projects with IRR equal to risk-free interest rate have been funded

4.projects with IRR greater than risk-free interest rate have been funded

According to the MM proposition, dividend policy is

1.correlated

2.under-performed

3.relevant

4.irrelevant

An asset that pays a fixed amount of cash each year for a specified number of years is called

1.perpetuity

2.dividend

3.liquidity

4.annuity

An investment should be accepted if

1.Rate of Return > Opportunity Cost

2.Rate of Return < Opportunity Cost

3.Rate of Return = Opportunity Cost

4.A, B and C are irrelevant

An investment should be accepted if its NPV is

1.0

2.1

3.positive

4.negative

An investor will receive $5,000 and $10,000 after one and two years from today respectively. If the interest rate during this period is 10% then what is the present value of this cash flow?

1.$12000

2.$12450

3.$12810

4.$13705

Any economic resource that can produce economic value to the holder is called

1.asset

2.return

3.maturity

4.yield

At maturity the bond holders get back their principal. The principal is called

1.coupon

2.face value

3.yield

4.return

Companies go public in order to

1.avoid taxes

2.reduce management cost

3.raise more cash

4.get merge

Companies go public with the help of

1.venture capital firms

2.underwriters

3.shareholders

4.A, B and C

Corporations can return cash to their shareholders by

1.paying cash dividends

2.stock repurchase

3.both A and B

4.none of these

Financial managers are interested in __________ when see bond market

1.yield to maturity

2.duration

3.volatility

4.term structure

Firms that invest in new companies as they try to grow are called

1.spinning

2.underwriters

3.venture capitalists

4.venture capital firms

Governments and corporations issue bonds to

1.borrow money

2.lend money

3.both A and B

4.none of these

he relationship between short and long term interest rates is called __________ of interest rates.

1.yield to maturity

2.duration

3.volatility

4.term structure

If beta of a stock is __________ then it tends to amplify the overall market movement.

1.0

2.1

3.greater than 1

4.between 0 and 1

If stock prices increases, dividend yield

1.also increases

2.decreases

3.remains same

4.increases to one and a half

If two firms at different stages of production merge together, it is called __________ merger

1.horizontal

2.vertical

3.straight

4.conglomerate

If two firms in the same line of business merge together, it is called __________ merger.

1.horizontal

2.vertical

3.straight

4.conglomerate

If two firms in unrelated line of business merge together, it is called __________ merger.

1.horizontal

2.vertical

3.straight

4.conglomerate

In a well-functioning capital market if the firm pays no taxes then what is better about borrowing?

1.Borrowing is not a good idea in this case

2.No difference who (firm or shareholders) borrows

3.It is better that the firm borrows

4.It is better that the shareholders borrow

In a well-functioning markets two investments that offer the same payoff must have the same

1.beta

2.return

3.risk

4.price

In portfolio analysis __________ curves play an important role.

1.circle

2.ellipse

3.parabola

4.hyperbola

In the beginning, some companies receive equity investment from wealthy individuals. The wealthy individuals are called

1.angel investors

2.corporate investors

3.venture capitalists

4.venture capital firms

Investors require higher return on

1.levered equity

2.unlevered equity

3.both levered and unlevered

4.bond equity

Net Present Value is calculated as

1.cash inflow - cash outflow

2.cash outflow - cash inflow

3.PV of cash inflow - PV of cash outflow

4.PV of cash outflow - PV of cash inflow

Regular interest payment to the bond holders is called

1.principal

2.coupon

3.face value

4.yield

Risk __________ with the duration of bond.

1.remains same

2.increases

3.decreases

4.multiplied

Suppose our portfolio consists of two stocks A and B. What should be the correlation between them so that we have no risk in our portfolio?

1.1

2.0

3.1

4.risk cannot be eliminated

The average beta of all stocks in a market is

1.1

2.0

3.1

4.1.5

The contribution of an individual security to the risk of a well-diversified portfolio is measured by?

1.beta

2.variance

3.standard deviation

4.CAPM

The difference between the public-offer price and the price paid by the underwriter is called

1.underpricing

2.spread

3.commission

4.margin

The measure for calculating how much two random variable change together is called

1.variance

2.covariance

3.skewness

4.skewness

The mixture of debt and equity, used to finance a corporation is also known as

1.capital structure

2.capital budgeting

3.investing

4.treasury

The money a investor receive for taking on a risk is called

1.risk premium

2.risk free rate

3.option value

4.arbitrage

The normalized version of covariance is called

1.regression

2.correlation

3.cross-section

4.spread

The present value of $100 expected in two years from today at a discount rate of 5% is

1.$105

2.$110.7

3.$95

4.$90.7

The ratio between the amount of profit and investment is called the

1.NPV

2.opportunity cost

3.risk premium

4.rate of return

The risk of a well-diversified portfolio depends on the __________ of the securities included in the portfolio.

1.specific risk

2.market risk

3.both A and B

4.none of these

The sensitivity of an asset to the market movements is called

1.beta

2.variance

3.standard deviation

4.CAPM

The success of a new company critically depends on

1.managers

2.board of directors

3.shareholders

4.venture capitalists

The underwriters receive their payments in the shape of

1.underpricing

2.spread

3.commission

4.margin

The value of correlation is always between __________ (inclusive).

1.1 and 0

2.0 and 1

3.1 and 1

4.none of these

The value of probability is always between __________ (inclusive).

1.1 and 0

2.0 and 1

3.1 and 1

4.none of these

Underwriters are also called

1.bookrunner

2.venture capitalists

3.subscribers

4.angel investors

What should be the goal of a corporation?

1.to maximize the profit of the shareholders

2.to maximize the value of the corporation

3.both A and B

4.to take care of the interests of the management

What will be value of $100 after two years, if the interest rate during this period is 5%?

1.$105

2.$107.5

3.$110.25

4.$95

Which from the following is not the role of an underwriter?

1.They provide procedural and financial advice

2.They buy the issue

3.They resell the issue to the public

4.They provide funds to the corporation

Which from the following is true about stock repurchases?

1.Repurchases are more flexible

2.Repurchases are tax-advantaged

3.both A and B

4.none of these

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