Finance Test with Answers

Test 1

Question 1
0 out of 1 points

Which of the following securities will likely have the highest liquidity premium?
Answer

Selected Answer: a.
U.S. Treasury Bond maturing in 2027
Correct Answer: c.
Aaa-rated corporate bond maturing in 2015 not actively traded

Question 2
0 out of 2 points

The curse of competitive markets
Answer

Selected Answer: a.
Means that companies cannot earn exceptional profits.
Correct Answer: c.
May be lessened by obtaining patents for new ideas that protect companies from competitors.

Question 3
2 out of 2 points

Two assets, A and B, have the same expected return (10%) and the same level of risk (average). Which of the following statements is true?
Answer

Selected Answer: d.
A combination of assets A and B will have the same expected return (10%) as either asset A or asset B, but may have less than average risk depending on how the cash flows from each asset move together.
Correct Answer: d.
A combination of assets A and B will have the same expected return (10%) as either asset A or asset B, but may have less than average risk depending on how the cash flows from each asset move together.

Question 4
2 out of 2 points

When a company repurchases its own common stock, it is likely that
Answer

Selected Answer: a. the stock price will increase because the company views the stock as undervalued.
Correct Answer: a. the stock price will increase because the company views the stock as undervalued.

Question 5
3 out of 3 points

To compound $100 quarterly for 20 years at 8%, we must use:
Answer

Selected Answer: d.
80 periods at 2%.
Correct Answer: d.
80 periods at 2%.

Question 6
2 out of 2 points

The stock market with the most stringent listing requirements is the
Answer

Selected Answer: a.
New York Stock Exchange (NYSE).
Correct Answer: a.