Q1: Which of the following is NOT the type of Hybrid organizations?
(A) S-Type Corporation
(B) Limited Liability Partnership
(C) Sole Proprietorship
(D) Professional Corporation
Answer: (C) Sole Proprietorship
Q2: Which of the following value of the shares changes with investor’s perception about the company’s future and supply and demand situation?
(A) Par value
(B) Market value
(C) Intrinsic value
(D) Face value
Answer: (B) Market value
Q3: In the dividend discount model, _____ which of the following are not incorporated into the discount rate?
(A) Real risk-free rate
(B) Risk premium for stocks
(C) Return on assets
(D) Expected inflation rate
Answer: (C) Return on assets
Q4: How dividend yield on a stock is similar to the current yield on a bond?
(A) Both represent how much each security’s price will increase in a year
(B) Both represent the security’s annual income divided by its price
(C) Both are an accurate representation of the total annual return an investor can expect to earn by owning the security
(D) Both are quarterly yields that must be annualized
Answer: (B) Both represent the security’s annual income divided by its price
Q5: A capital budgeting technique through which discount rate equates the present value of the future net cash flows from an investment project with the project’s initial cash outflow is known as:
(A) Payback period
(B) Internal rate of return
(C) Net present value
(D) Profitability index
Answer: (B) Internal rate of return
Q6: What should be the focal point of financial management in a firm?
(A) The number and types of products or services provided by the firm
(B) The minimization of the amount of taxes paid by the firm
(C) The creation of value for shareholders
(D) The dollars profits earned by the firm
Answer: (C) The creation of value for shareholders
Q7: Which of the following is a capital budgeting technique that is NOT considered as discounted cash flow method?
(A) Payback period
(B) Internal rate of return
(C) Net present value
(D) Profitability index
Answer: (A) Payback period
Q8: Which of the following is the risk of investing funds in another country?
(A) Default risk premium
(B) Sovereign Risk Premium
(C) Market risk premium
(D) Maturity risk premium
Answer: (B) Sovereign Risk Premium
Q9: Given no change in required returns, the price of a stock whose dividend is constant will________.
(A) Decrease over time at a rate of r%
(B) Remain unchanged
(C) Increase over time at a rate of r%
(D) Decrease over time at a rate equal to the dividend growth rate
Answer: (B) Remain unchanged
Q10: Which of the following is not the present value of the bond?
(A) Intrinsic value
(B) Market price
(C) Fair price
(D) Theoretical price
Answer: (B) Market price