Ashford ENG 121 – If interest rates rise, what will happen
Question 1 (5 points)
If interest rates rise, what will happen to a standard bond
(all else being equal)?
Question 1 options:
The price will go down.
Interest payments will go up.
The price will go up.
Interest payments will go down.
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Question 2 (5 points)
According to the constant growth valuation (Gordon) model,
the value of a share of common stock is equal to the:
Question 2 options:
present value of all expected future dividends.
future stock price discounted at the cost of equity.
assets minus debts.
present value of all future cash flows.
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Question 3 (5 points)
The after-tax cost of debt for a firm with a 10% before-tax
cost of debt and a 30% percent marginal tax rate is:
Question 3 options:
13 percent.
10 percent.
3 percent.
7 percent.
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Question 4 (5 points)
What entities are typically net demanders of funds in the
U.S. economy?
Question 4 options:
Individuals and government
Businesses and government
Individuals and businesses
Individuals, government, and businesses
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Question 5 (5 points)
Where does a corporation sell a new issue of common stock?
Question 5 options:
The primary market
The secondary market
The money market
The commodities market
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Question 6 (5 points)
In the U.S., what form of business organization is subject
to double taxation of profits?
Question 6 options:
Limited partnerships
Corporations
Partnerships
Sole proprietorships
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Question 7 (5 points)
Which of the following is true?
Question 7 options:
Globalization has harmed the sales of most U.S.
corporations.
The U.S. has lower corporate taxes than most other
industrialized nations.
Legally, a U.S. corporation must have the majority of its
sales in the U.S.
Many large U.S corporations have more sales and profits in
foreign companies than in the U.S.
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Question 8 (5 points)
The beta of the market portfolio is:
Question 8 options:
0.
greater than 1.
1.
changes yearly.
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Question 9 (5 points)
According to the DuPont analysis, return on assets (ROA)
consists of:
Question 9 options:
ROE x debt ratio.
profit margin x asset turnover.
ROE / (1 – Debt/Assets).
gross profits x equity margin.
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Question 10 (5 points)
Which of these shows financing sources in order from least
costly to most costly?
Question 10 options:
Retained earnings, long-term debt, new common stock
New common stock, retained earnings, long-term debt
Retained earnings, new common stock, long-term debt
Long-term debt, retained earnings, new common stock
Question 11 (5 points)
Generally, an increase in current assets relative to total
assets:
Question 11 options:
decreases returns and risk.
increases returns and decreases risk.
has no effect on return or risk.
increases returns and risk..
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Question 12 (5 points)
The rate of interest actually paid or earned that includes
compounded interest is called the ____________ rate.
Question 12 options:
effective
external
internal
nominal
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Question 13 (5 points)
If you knew the stock market was going to increase next
year, which of the following portfolios should you purchase (according to CAPM
theory)?
Question 13 options:
A portfolio with a beta of 0
A portfolio with a beta of -1
A portfolio with a beta of 2
A portfolio with a beta of 1
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Question 14 (5 points)
2/10 net 30 means:
Question 14 options:
2% payment due in 10 days and balance in 30 days.
10% discount if paid in 2 days; otherwise, pay in 30 days.
10% payment due in 2 days and balance in 30 days.
2% discount if paid in 10 days; otherwise, pay in 30 days..
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Question 15 (5 points)
The portfolio that maximizes return for a given level of
risk or minimizes risk for a given level of return is called the __________
portfolio.
Question 15 options:
efficient
frontier
investment banker
risk-free
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Question 16 (5 points)
If the exchange rate between the U.S. dollar and the Japanese
yen is 140 yen per dollar, how many yen will be needed to purchase a $10,000
asset?
Question 16 options:
0.0140
14,000
7,143
10,000
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Question 17 (5 points)
When evaluating two projects with different risk levels, one
way to account for this is to:
Question 17 options:
require a longer payback period for the safer project.
use a higher discount rate for the riskier project..
require a longer payback period for the riskier project.
use a lower discount rate for the riskier project.
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Question 18 (5 points)
The __________ summarizes a firm’s revenues, expenses, and
profit during a specific period.
Question 18 options:
balance sheet
statement of cash flows
retained earnings statement
income statement
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Question 19 (5 points)
A firm’s capital structure is composed of the following
sources and after-tax costs: 30% long-term debt (cost 6%), 10% preferred stock
(cost 8%), and 60% common stock (cost 14%). The weighted average cost of
capital is:
Question 19 options:
10 percent.
12 percent.
13 percent.
11 percent.
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Question 20 (5 points)
What is the present value of $100 received in one year, $200
received in two years, and $300 received in three years if the opportunity cost
is 12%?
Question 20 options:
$417
$562
$462
$517
