Question 1

If one security has a greater risk than another security,how will investors respond?

Accepted Answer

A) They will require a lower rate of return for the investment that has greater risk. 
B) They would be indifferent regarding their expectation of rates of return for either investment. 
C) They will require a higher rate of return for the investment that has greater risk. 
D) None of the above. 
A) They will require a lower rate of return for the investment that has greater risk. 
B) They would be indifferent regarding their expectation of rates of return for either investment. 
C) They will require a higher rate of return for the investment that has greater risk. 
D) None of the above.

Question 2

The price of Netflix stock dropped sharply after customers responded negatively to a change in pricing policies.The change in stock price illustrates which principle?

Accepted Answer

A) Market prices reflect information. 
B) Individuals respond to incentives. 
C) Cash flows are the source of value. 
D) The time-value of money. 
A) Market prices reflect information. 
B) Individuals respond to incentives. 
C) Cash flows are the source of value. 
D) The time-value of money.

Question 3

The agency problem arises due to the separation of ownership and control in a corporation.

Accepted Answer

A) True 
 B)False

Question 4

Consider the following equally likely project outcomes:
Profit
X Y
Pessimistic prediction $ 0 $500
Expected outcome $ 500 $500
Optimistic prediction $1000 $500

Accepted Answer

A) Investors will prefer project X because it potentially offers a higher profit. 
B) Investors will reject both projects because the profit is too low. 
C) Investors will prefer project Y because the expected return is the same as for project X but the outcome is certain. 
D) Since Projects X and Y have the same expected outcomes of $500,investors will view them as identical in value. 
A) Investors will prefer project X because it potentially offers a higher profit. 
B) Investors will reject both projects because the profit is too low. 
C) Investors will prefer project Y because the expected return is the same as for project X but the outcome is certain. 
D) Since Projects X and Y have the same expected outcomes of $500,investors will view them as identical in value.

Question 5

A limited partner is liable

Accepted Answer

A) for only his or her own share of the partnership's debts. 
B) for his or her own share of the partnership's debts and contingently liable for the other partners shares. 
C) only up to the amount invested by that partner. 
D) for none of the partnership's debts. 
A) for only his or her own share of the partnership's debts. 
B) for his or her own share of the partnership's debts and contingently liable for the other partners shares. 
C) only up to the amount invested by that partner. 
D) for none of the partnership's debts.

Question 6

The area of finance that deals with long-term investment decisions is known as

Accepted Answer

A) capital structure. 
B) working capital management. 
C) financial strategy. 
D) capital budgeting. 
A) capital structure. 
B) working capital management. 
C) financial strategy. 
D) capital budgeting.

Question 7

Which of the following forms of organization blends elements of partnerships and corporations?

Accepted Answer

A) D.B.A.'s 
B) Sole proprietorships 
C) Limited liability companies (LLC's) 
D) General partnership 
A) D.B.A.'s 
B) Sole proprietorships 
C) Limited liability companies (LLC's) 
D) General partnership

If one security has a greater risk than another security,how will investors respond?

The price of Netflix stock dropped sharply after customers responded negatively to a change in pricing policies.The change in stock price illustrates which principle?

The agency problem arises due to the separation of ownership and control in a corporation.

Consider the following equally likely project outcomes: Profit X Y Pessimistic prediction $ 0 $500 Expected outcome $ 500 $500 Optimistic prediction $1000 $500

A limited partner is liable

The area of finance that deals with long-term investment decisions is known as

Which of the following forms of organization blends elements of partnerships and corporations?

Firms and the Financial Market

Understanding Financial Statements,taxes,and Cash Flows

Financial Analysis-Sizing up Firm Performance

Time Value of Money-The Basics

The Time Value of Money-Annuities and Other Topics

An Introduction to Risk and Return-History of Financial Market Returns

Risk and Return-Capital Market Theory

Debt Valuation and Interest Rates

Stock Valuation

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Dividend Policy

Financial Forecasting and Planning

Working Capital Management

International Business Finance

Corporate Risk Management

Filters

Exam 1: Getting Started-Principles of Finance

If one security has a greater risk than another security,how will investors respond?

The price of Netflix stock dropped sharply after customers responded negatively to a change in pricing policies.The change in stock price illustrates which principle?

The agency problem arises due to the separation of ownership and control in a corporation.

Consider the following equally likely project outcomes: Profit X Y Pessimistic prediction $ 0 $500 Expected outcome $ 500 $500 Optimistic prediction $1000 $500

A limited partner is liable

The area of finance that deals with long-term investment decisions is known as

Which of the following forms of organization blends elements of partnerships and corporations?

Firms and the Financial Market

Understanding Financial Statements,taxes,and Cash Flows

Financial Analysis-Sizing up Firm Performance

Time Value of Money-The Basics

The Time Value of Money-Annuities and Other Topics

An Introduction to Risk and Return-History of Financial Market Returns

Risk and Return-Capital Market Theory

Debt Valuation and Interest Rates

Stock Valuation

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Dividend Policy

Financial Forecasting and Planning

Working Capital Management

International Business Finance

Corporate Risk Management

Filters