Question 25 (1 point) The effect of an efficient portfolio is that systematic ri

Question

Question 25 (1 point)

The effect of an efficient portfolio is that systematic risk is largely eliminated.

Question 25 options:

True

False

Question 26 (1 point)

A firm that has recurring, temporary needs for short term financing and a restrictive working capital policy will most likely:

Question 26 options:

issue bonds

establish a revolving line of credit with a bank

issue new stock

reduce the dividend it pays

Question 27 (1 point)

The Required Rate of Return for a firm's stock is calculated with the CAPM. That Rate is also used as the Cost of Equity when calculating that firm's WACC.

Question 27 options:

True

False

Question 28 (1 point)

All of the following are true EXCEPT:

Question 28 options:

Total liabilities & equity - equity - current liabilities = long term liabilities

Equity + Liabilities = Assets

Long term assets = equity-current assets

Current assets - current liabilities = Net Working Capital

At age 66 you begin receiving monthly (m=12) social security payments of $2,100 at the end of each month. If you expect to live until age 86 (20 more years), and the discount rate is 3.2%, what is the present value of your social security benefit?

Your Answer:

Question 30 (1 point)

You buy a house and finance it with a $250,000 30-year mortgage loan that requires equal payments at the end of each month. Your APR is set at 5.4%. What would be the amount of each of your monthly payments?

Your Answer:

If the market interest rate is higher than the coupon rate of a bond, the bond will sell at a premium.

Question 31 options:

True

False

Question 32 (1 point)

Which of the below is TRUE?

Question 32 options:

A decrease in borrowings will increase cash flow to creditors

An increase in borrowings will decrease cash flow to stockholders

An increase in dividends paid will decrease cash flow to stockholders

Issuing new stock will increase cash flow to stockholders

True

False

Explanation / Answer

25.

in efficinet portfolio unsystematic risk that is diversifiable risk is less or eliminated nut systematic risk or maket risk cannot be eliminated.

Statement is false.

26.

A firm that has recurring, temporary needs for short term financing and a restrictive working capital policy will most likely reduce its dividend and use those cash in short term financing.

Option (D) is correct answer.

27.

Capital Assets pricing model is the method uses to determine required rate of return of an asset. This method uses, Risk free rate, market return and beta (a measure of market risk) to determine required rate of return on an asset. That Rate is also used as the Cost of Equity when calculating that firm's WACC.

statement is true.

28.

General formula of balance sheet states total assets of company is equal to total liability plus shareholder equity. where, total assets includes current assets and fixed assets and liability includes long term debt and current liability and shareholderholder equity includes shareholder contribution in business.

So, Long term assets equal to equity-current assets is not true.

Option (C) is not true.

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