Question 1

Which of the following is an example of a call option which is in the money?

Accepted Answer

A)  The option to sell at $11, the stock is worth $12. 
B)  The option to buy at $13, the stock is worth $12. 
C)  The option to buy at $12, the stock is worth $12. 
D)  The option to sell at $13, the stock is worth $12. 
E)  The option to buy at $11, the stock is worth $12. 
A)  The option to sell at $11, the stock is worth $12. 
B)  The option to buy at $13, the stock is worth $12. 
C)  The option to buy at $12, the stock is worth $12. 
D)  The option to sell at $13, the stock is worth $12. 
E)  The option to buy at $11, the stock is worth $12. E

Question 2

Convertible debt has all of the following except:

Accepted Answer

A)  bankruptcy rights 
B)  regular dividend payments 
C)  it can be structured to provide senior interest in specific assets 
D)  a tax shield due to interest expense 
E)  a security interest in the firms' assets 
A)  bankruptcy rights 
B)  regular dividend payments 
C)  it can be structured to provide senior interest in specific assets 
D)  a tax shield due to interest expense 
E)  a security interest in the firms' assets B

Question 3

Which of the following are components of common equity?

Accepted Answer

A)  common stock 
B)  preferred stock 
C)  a and b 
D)  none of the above 
A)  common stock 
B)  preferred stock 
C)  a and b 
D)  none of the above A

Question 4

The Black and Scholes model requires the stock price as an input.

Accepted Answer

A) True 
 B)False

Question 5

If a share of preferred stock has a $10 par value, and the stock has a 2:1 conversion ratio, then the conversion price would be $5.

Accepted Answer

A) True 
 B)False

Question 6

An American-style option is an option that can be exercised only at the expiration date

Accepted Answer

A) True 
 B)False

Question 7

Convertible preferred stockholders have the right to convert a preferred share into a specified number of common shares at any time after the expiration date.

Accepted Answer

A) True 
 B)False

Question 8

The value of a warrant can be directly derived from the value of a call option.

Accepted Answer

A) True 
 B)False

Question 9

The concept of an enterprise value is that it is the combined value of all of venture's financing, typically equity plus all of the debt.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following offers the option where the dividend obligation can be satisfied in cash or by issuing additional par amounts of the preferred security?

Accepted Answer

A)  paid in kind preferred stock 
B)  cumulative preferred stock 
C)  participating preferred stock 
D)  convertible preferred stock 
E)  non-cumulative preferred stock 
A)  paid in kind preferred stock 
B)  cumulative preferred stock 
C)  participating preferred stock 
D)  convertible preferred stock 
E)  non-cumulative preferred stock

Question 11

Which of the following requires that all previously unpaid preferred dividends must be paid prior to any common dividend?

Accepted Answer

A)  paid in kind preferred stock 
B)  cumulative preferred stock 
C)  participating preferred stock 
D)  convertible preferred stock 
E)  non-cumulative preferred stock 
A)  paid in kind preferred stock 
B)  cumulative preferred stock 
C)  participating preferred stock 
D)  convertible preferred stock 
E)  non-cumulative preferred stock

Question 12

Which of the following provides the option to transform preferred stock into common stock?

Accepted Answer

A)  paid in kind preferred stock 
B)  cumulative preferred stock 
C)  participating preferred stock 
D)  convertible preferred stock 
E)  non-cumulative preferred stock 
A)  paid in kind preferred stock 
B)  cumulative preferred stock 
C)  participating preferred stock 
D)  convertible preferred stock 
E)  non-cumulative preferred stock

Question 13

An option that can be exercised only at its expiration date is called a:

Accepted Answer

A)  forward contract 
B)  lookback option 
C)  American-Style option 
D)  European-Style option 
E)  Bermuda-Style option 
A)  forward contract 
B)  lookback option 
C)  American-Style option 
D)  European-Style option 
E)  Bermuda-Style option

Question 14

Convertible notes are debt allowing for conversion into stock at a price set by a future financing round.Note: The following TF questions relate to Learning Supplements 14A and 14B:

Accepted Answer

A) True 
 B)False

Question 15

The unadjusted Black and Scholes model is a model for determining the value of a warrant to buy a new share.

Accepted Answer

A) True 
 B)False

Question 16

Options generally have no effect on the value of a venture capital investment.

Accepted Answer

A) True 
 B)False

Question 17

An option not currently worth exercising is said to be an out of the money option.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following stock can be structured to assure the shareholder that they will share in the payment of any dividends to common stockholders?

Accepted Answer

A)  paid in kind preferred stock 
B)  cumulative preferred stock 
C)  participating preferred stock 
D)  convertible preferred stock 
E)  non-cumulative preferred stock 
A)  paid in kind preferred stock 
B)  cumulative preferred stock 
C)  participating preferred stock 
D)  convertible preferred stock 
E)  non-cumulative preferred stock

Question 19

The enterprise method of valuation can be executed with either an after-tax or before-tax weighted cost of capital as long as the rate is applied to the appropriate enterprise cash flows.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following have the least senior claim on a venture's asset?

Accepted Answer

A)  common Stock 
B)  preferred stock 
C)  convertible preferred stock 
D)  convertible debt 
E)  American-style option 
A)  common Stock 
B)  preferred stock 
C)  convertible preferred stock 
D)  convertible debt 
E)  American-style option

Which of the following is an example of a call option which is in the money?

Convertible debt has all of the following except:

Which of the following are components of common equity?

The Black and Scholes model requires the stock price as an input.

If a share of preferred stock has a $10 par value, and the stock has a 2:1 conversion ratio, then the conversion price would be $5.

An American-style option is an option that can be exercised only at the expiration date

Convertible preferred stockholders have the right to convert a preferred share into a specified number of common shares at any time after the expiration date.

The value of a warrant can be directly derived from the value of a call option.

The concept of an enterprise value is that it is the combined value of all of venture's financing, typically equity plus all of the debt.

Which of the following offers the option where the dividend obligation can be satisfied in cash or by issuing additional par amounts of the preferred security?

Which of the following requires that all previously unpaid preferred dividends must be paid prior to any common dividend?

Which of the following provides the option to transform preferred stock into common stock?

An option that can be exercised only at its expiration date is called a:

Convertible notes are debt allowing for conversion into stock at a price set by a future financing round.Note: The following TF questions relate to Learning Supplements 14A and 14B:

The unadjusted Black and Scholes model is a model for determining the value of a warrant to buy a new share.

Options generally have no effect on the value of a venture capital investment.

An option not currently worth exercising is said to be an out of the money option.

Which of the following stock can be structured to assure the shareholder that they will share in the payment of any dividends to common stockholders?

The enterprise method of valuation can be executed with either an after-tax or before-tax weighted cost of capital as long as the rate is applied to the appropriate enterprise cash flows.

Which of the following have the least senior claim on a venture's asset?

Introduction to Finance for Entrepreneurs

Developing the Business Idea

Organizing and Financing a New Venture

Preparing and Using Financial Statements

Evaluating Operating and Financial Performance

Managing Cash Flow

Types and Costs of Financial Capital

Securities Law Considerations When Obtaining Venture Financing

Projecting Financial Statements

Valuing Early-Stage Ventures

Venture Capital Valuation Methods

Professional Venture Capital

Other Financing Alternatives

Harvesting the Business Venture Investment

Financially Troubled Ventures: Turnaround Opportunities

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Exam 14: Security Structures and Determining Enterprise Values

Which of the following is an example of a call option which is in the money?

Convertible debt has all of the following except:

Which of the following are components of common equity?

The Black and Scholes model requires the stock price as an input.

If a share of preferred stock has a $10 par value, and the stock has a 2:1 conversion ratio, then the conversion price would be $5.

An American-style option is an option that can be exercised only at the expiration date

Convertible preferred stockholders have the right to convert a preferred share into a specified number of common shares at any time after the expiration date.

The value of a warrant can be directly derived from the value of a call option.

The concept of an enterprise value is that it is the combined value of all of venture's financing, typically equity plus all of the debt.

Which of the following offers the option where the dividend obligation can be satisfied in cash or by issuing additional par amounts of the preferred security?

Which of the following requires that all previously unpaid preferred dividends must be paid prior to any common dividend?

Which of the following provides the option to transform preferred stock into common stock?

An option that can be exercised only at its expiration date is called a:

Convertible notes are debt allowing for conversion into stock at a price set by a future financing round.Note: The following TF questions relate to Learning Supplements 14A and 14B:

The unadjusted Black and Scholes model is a model for determining the value of a warrant to buy a new share.

Options generally have no effect on the value of a venture capital investment.

An option not currently worth exercising is said to be an out of the money option.

Which of the following stock can be structured to assure the shareholder that they will share in the payment of any dividends to common stockholders?

The enterprise method of valuation can be executed with either an after-tax or before-tax weighted cost of capital as long as the rate is applied to the appropriate enterprise cash flows.

Which of the following have the least senior claim on a venture's asset?

Introduction to Finance for Entrepreneurs

Developing the Business Idea

Organizing and Financing a New Venture

Preparing and Using Financial Statements

Evaluating Operating and Financial Performance

Managing Cash Flow

Types and Costs of Financial Capital

Securities Law Considerations When Obtaining Venture Financing

Projecting Financial Statements

Valuing Early-Stage Ventures

Venture Capital Valuation Methods

Professional Venture Capital

Other Financing Alternatives

Harvesting the Business Venture Investment

Financially Troubled Ventures: Turnaround Opportunities

Filters