Fin Study Guide

Quiz 1- Spring 2013

Group 1
1. Which of the following concerning the relationship between risk and return is correct?
A. Investors do not need to be compensated for taking on risk.
B. Investors generally demand higher return for lower risk investments.
C. Safer investments tend to have lower returns.
D. Higher risk investments provide lower returns.
E. Risk and return are not related.

2. Which of the following concerning the relationship between risk and return is correct?
A. Risk and return are inversely related.
B. Investors generally require a higher return as they take on more risk.
C. Safer investments tend to have higher returns.
D. Higher risk investments historically provided lower returns.
E. Investors do not need to be compensated for taking on risk.

Group 2
3. Calculate the stock return from the following information.
Beginning Price: $50.00
Price 1 Year Later: $63.75
Annual dividend: $2.25
A. 5.45%
B. 25.1%
C. 27.5%
D. 32.0%
E. -23.0%

4. Calculate the stock return from the following information.
Beginning Price: $83.75
Ending Price: $72.50
Annual dividend: $5.25
A. -8.3%
B. 19.7%
C. 15.5%
D. -7.2%
E. -13.4%

Group 3
5. Which of the following portfolios is the most risky?
A. Small company stocks
B. Corporate bonds
C. Treasury bonds
D. Large company stocks
E. Savings account

6. Which of the following portfolios is the least risky?
A. Small company stocks
B. Corporate bonds
C. Treasury bonds
D. Large company stocks
E. Commodity futures

Group 4
7. Which of the following is part of the treasurer's function?
A. Auditing the company’s financials
B. Publishing financial statements
C. Making capital expenditures
D. Monitoring accounting systems
E. Filing the company’s taxes

8. Which of the following is part of the controller’s function?
A. Determining the feasibility of various projects
B. Financial planning
C. Managing short and long term capital