51) __________ says to seek out investments that offer the greatest expected risk-adjusted real return.
A. The Principle of Self-Interested Behavior
B. The Signaling Principle
C. The Principle of Incremental Benefits
D. The Principle of Valuable Ideas
52) A checking account is __________.
A. a place to “collect” money between inflows and outflows
B. an account that acts like a reservoir
C. useful because you can add money in any amount
D. all of these
53) Which of the following statements is true?
A. The Principle of Incremental Benefits says to consider the possible ways to minimize the value lost to capital market imperfections, such as asymmetric taxes, asymmetric information, and transaction costs.
B. The Principle of Valuable Ideas suggests to look for opportunities to create value by issuing securities that are in short supply, perhaps resulting from changes in tax law.
C. The Time Value of Money Principle advises to include any time-value-of-money tax benefits from capital structure choices.
D. all of these
54) __________ says to recognize the value of hidden options in a situation, such as the foreign exchange options in some derivative instruments.
A. The Principle of Two-Sided Transactions
B. The Options Principle
C. The Principle of Comparative Advantage
D. The Time Value of Money Principle
55) An all-equity-financed firm would __________.
A. not pay corporate income taxes because it would have no interest expense.
B. not pay any income taxes because interest would exactly offset its taxable income.
C. pay corporate income taxes because it would have interest expense.
D. pay corporate income taxes if its taxable income is positive
62) You work for ABC, Inc. in the finance department. You own shares in ABC, Inc. that are selling at $20 per share on the NYSE. You just found out they will have a new stock offering. You just found out they will publicly announce a new stock offering. The costs from the offering will be 10% of the new offering. The new offering will increase the number of outstanding share by 30%. There are currently 20,000,000 shares of ABC outstanding. Once the announcement is made public, what might be the expected impact from transaction (or issuance) costs on each share you own?
A. You will lose 2% of the value of the shares you own.
B. There will be no costs because markets are perfect when it comes to new stock offerings.
C. There will be no costs because there is no information asymmetry present.
D. You will lose 3% of the value of the share you own.
63) Which (if any) statement is false?
A. The Principle of Self-Interested Behavior suggests that self-interested capital market transactions force market prices toward being fair prices.
B. The Principle of Two-Sided Transactions states that intense capital market competition to get and use information to take advantage of arbitrage opportunities eliminates such opportunities.
C. The Principle of Signaling states that information in the transactions of others can be valuable, such as providing an accurate measure of current market value, or information about expected future value.
D. none of these answers are correct.
64) You do a study and find out that, on average, stock prices for firms decrease 3% for every 5% decrease in inside ownership. You are watching the nightly business report and find out that Magic Tape’s stock has announced that insiders have sold 10% of their holdings. You are concerned because you own 1,000 shares of Magic Tape and it had closed the day before unchanged at $30 per share. If markets are at least semi-strong form efficient, what would you expect?
A. You would lose $1,800.
B. You would expect Magic Tape to close at $28 the day of the announcement.
C. You would lose $4,000.
D. You would lose $2.00 per share
65) Incremental analysis would be appropriate for
A. acceptance of an order at a special price.
B. a retain or replace equipment decision.
C. a sell or process further decision.
D. all of the answers are correct.
Total 500 Questions from 5 set of actual exams (5 sets x 100 questions) with double checked answers
final exam str 581
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str 581 final exam
str 581 final
100 % A+ Correct answers !! Double Checked
str 581 final exam answers
str 581 final exam
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