Financial literacy

Which of the following statements is CORRECT, other things held constant? a. Int

Which of the following statements is CORRECT, other things held constant? a. Interest rates on all debt securities tend to rise during recessions because recessions increase the p…

Which of the following statements is CORRECT? (Assume that the risk-free rate is

Which of the following statements is CORRECT? (Assume that the risk-free rate is a constant.)Answer If the market risk premium increases by 1%, then the required return will incre…

Which of the following statements is CORRECT? (Points : 0.41) The internal rate

           Which of the following statements is CORRECT? (Points : 0.41)        The internal rate of return method (IRR) is generally regarded by academics as being the best singl…

Which of the following statements is CORRECT? (Points : 0.41) The regular paybac

Which of the following statements is CORRECT? (Points : 0.41) The regular payback method recognizes all cash flows over a project’s life. The discounted payback method recognizes …

Which of the following statements is CORRECT? (Points : 0.83) A change in a comp

Which of the following statements is CORRECT? (Points : 0.83) A change in a company’s target capital structure cannot affect its WACC. WACC calculations should be based on the bef…

Which of the following statements is CORRECT? (Points : 0.83) The \"break point\

Which of the following statements is CORRECT? (Points : 0.83)       The "break point" as discussed in the text refers to the point where the firm's tax rate increases.        The …

Which of the following statements is CORRECT? (Points : 1) A 10-year, 10% coupon

Which of the following statements is CORRECT? (Points : 1) A 10-year, 10% coupon bond has less reinvestment rate risk than a 10-year, 5% coupon bond (assuming all else equal). The…

Which of the following statements is CORRECT? (Points : 10) If a project has “no

Which of the following statements is CORRECT? (Points : 10) If a project has “normal” cash flows, then its IRR must be positive. If a project has “normal” cash flows, then its MIR…

Which of the following statements is CORRECT? (Points : 10) In the statement of

Which of the following statements is CORRECT? (Points : 10) In the statement of cash flows, a decrease in accounts receivable is subtracted from net income in the operating activi…

Which of the following statements is CORRECT? (Points : 5) The typical R2 for a

Which of the following statements is CORRECT? (Points : 5) The typical R2 for a stock is about 0.3 and the typical R2 for a portfolio is also about 0.3. The typical R2 for a stock…

Which of the following statements is CORRECT? (Points : 5) a) The focal point of

Which of the following statements is CORRECT? (Points : 5) a) The focal point of the income statement is the cash account, because that account cannot be manipulated by "accountin…

Which of the following statements is CORRECT? (Points : 6) One of the disadvanta

Which of the following statements is CORRECT? (Points : 6) One of the disadvantages of a sole proprietorship is that the proprietor is exposed to unlimited liability. It is genera…

Which of the following statements is CORRECT? (a) If a company has a 2-for-1 sto

Which of the following statements is CORRECT? (a) If a company has a 2-for-1 stock split, its stock price should roughly double. (b) Capital gains earned on shares repurchased are…

Which of the following statements is CORRECT? (a) If the underlying stock does n

Which of the following statements is CORRECT? (a) If the underlying stock does not pay a dividend, it makes good economic sense to exercise a call option as soon as the stock’s pr…

Which of the following statements is CORRECT? -One of the ways in which firms ca

Which of the following statements is CORRECT? -One of the ways in which firms can mitigate or reduce potential conflicts between bondholders and stockholders is by increasing the …

Which of the following statements is CORRECT? 0 a. The cash flows for an ordinar

Which of the following statements is CORRECT? 0 a. The cash flows for an ordinary annuity all occur at the beginning of the periods O b. If a series of unequal cash flows occurs a…

Which of the following statements is CORRECT? 1. A time line is not meaningful u

Which of the following statements is CORRECT? 1. A time line is not meaningful unless all cash flows occur annually. 2. Time lines are not useful for visualizing complex problems …

Which of the following statements is CORRECT? 1. A time line is not meaningful u

Which of the following statements is CORRECT? 1. A time line is not meaningful unless all cash flows occur annually. 2. Time lines are not useful for visualizing complex problems …

Which of the following statements is CORRECT? 1. The ratio of long-term debt to

Which of the following statements is CORRECT? 1. The ratio of long-term debt to total capital is more likely to experience seasonal fluctuations than is either the DSO or the inve…

Which of the following statements is CORRECT? 1One of the ways in which firms ca

Which of the following statements is CORRECT? 1One of the ways in which firms can mitigate or reduce potential conflicts between bondholders and stockholders is by increasing the …

Which of the following statements is CORRECT? A The higher the maturity risk pre

Which of the following statements is CORRECT? A The higher the maturity risk premium, the higher the probability that the yield curve will be inverted. B The most likely explanati…

Which of the following statements is CORRECT? A change in the personal tax rate

Which of the following statements is CORRECT? A change in the personal tax rate should not affect firms' capital structure decisions "Business risk" is differentiated from "financ…

Which of the following statements is CORRECT? A portfolio with a large number of

Which of the following statements is CORRECT? A portfolio with a large number of randomly selected stocks would have more market risk than a single stock that has a beta of 0.5, a…

Which of the following statements is CORRECT? A project\'s NPV depends on the to

Which of the following statements is CORRECT? A project's NPV depends on the total amount of cash flows the project produces, and the cash flows are discounted at the rate of IRR …

Which of the following statements is CORRECT? A zero coupon bond of any maturity

Which of the following statements is CORRECT? A zero coupon bond of any maturity will have more price risk than any coupon bond, even a perpetuity. If their maturities and other c…

Which of the following statements is CORRECT? A) For a project with normal cash

Which of the following statements is CORRECT? A) For a project with normal cash flows, any change in the WACC will change both the NPV and the IRR. B) To find the MIRR, we first c…

Which of the following statements is CORRECT? A) Preferred stockholders have a p

Which of the following statements is CORRECT? A) Preferred stockholders have a priority over bondholders in the event of bankruptcy to the income, but not to the proceeds in a liq…

Which of the following statements is CORRECT? A)Corporations generally are subje

Which of the following statements is CORRECT? A)Corporations generally are subject to fewer regulations and more favorable tax treatment than sole proprietorships and partnerships…

Which of the following statements is CORRECT? A. All else equal, increasing the

Which of the following statements is CORRECT? A. All else equal, increasing the debt ratio will increase the ROA. B. use of debt financing will tend to lower the basic earning pow…

Which of the following statements is CORRECT? A. All else equal, increasing the

Which of the following statements is CORRECT? A. All else equal, increasing the debt ratio will increase the ROA. B. The use of debt financing will tend to lower the basic earning…

Which of the following statements is CORRECT? A. Free cash flow (FCF) is, essent

Which of the following statements is CORRECT? A. Free cash flow (FCF) is, essentially, the cash flow that is available for interest and dividends after the company has made the in…

Which of the following statements is CORRECT? A. If a bond is selling at a disco

Which of the following statements is CORRECT? A. If a bond is selling at a discount to par, its current yield will be greater than its yield to maturity. B. All else equal, bonds …

Which of the following statements is CORRECT? A. If your uncle earned a higher r

Which of the following statements is CORRECT? A. If your uncle earned a higher return on his portfolio over a 10-year period than the return on the overall stock market, this woul…

Which of the following statements is CORRECT? A. In the WACC calculation, we mus

Which of the following statements is CORRECT? A. In the WACC calculation, we must adjust the cost of preferred stock (the market yield) to reflect the fact that 70% of the dividen…

Which of the following statements is CORRECT? A. It is generally more expensive

Which of the following statements is CORRECT? A. It is generally more expensive to form a proprietorship than a corporation because, with a proprietorship, extensive legal documen…

Which of the following statements is CORRECT? A. It is usually easier to transfe

Which of the following statements is CORRECT? A. It is usually easier to transfer ownership in a corporation than it is to transfer ownership in a sole proprietorship. Corporate s…

Which of the following statements is CORRECT? A. It is usually easier to transfe

Which of the following statements is CORRECT? A. It is usually easier to transfer ownership in a corporation than it is to transfer ownership in a sole proprietorship. B. Corporat…

Which of the following statements is CORRECT? A. Most firm\'s cash balances cons

Which of the following statements is CORRECT? A. Most firm's cash balances consist of transactions, compensating, precautionary, and speculative balances, and the optimal total ca…

Which of the following statements is CORRECT? A. Net cash flow (NCF) is defined

Which of the following statements is CORRECT? A. Net cash flow (NCF) is defined as follows: NCF = Net income - Depreciation and Amortization. B. Changes in working capital have no…

Which of the following statements is CORRECT? A. Net working capital is defined

Which of the following statements is CORRECT? A. Net working capital is defined as current assets minus the difference between current liabilities and notes payable, and any incre…

Which of the following statements is CORRECT? A. One advantage of dividend reinv

Which of the following statements is CORRECT? A. One advantage of dividend reinvestment plans is that they enable investors to avoid paying taxes on the dividends they receive. B.…

Which of the following statements is CORRECT? A. One of the disadvantages to a c

Which of the following statements is CORRECT? A. One of the disadvantages to a corporation owning preferred stock is that 70% of the dividends received represent taxable income to…

Which of the following statements is CORRECT? A. Since depreciation is a cash ex

Which of the following statements is CORRECT? A. Since depreciation is a cash expense, the faster an asset is depreciated, the lower the projected NPV from investing in the asset.…

Which of the following statements is CORRECT? A. Suppose a firm that has been ea

Which of the following statements is CORRECT? A. Suppose a firm that has been earning $2 and paying a dividend of $1.00, or a 50% payout, announces that it is increasing the divid…

Which of the following statements is CORRECT? A. The NPV method assumes that cas

Which of the following statements is CORRECT? A. The NPV method assumes that cash flows will be reinvested at the WACC, while the IRR method assumes reinvestment at the IRR. B. Th…

Which of the following statements is CORRECT? A. The constant growth model takes

Which of the following statements is CORRECT? A. The constant growth model takes into condsideration the capital gains investors expected to earn on a stock. B. Two firms with the…

Which of the following statements is CORRECT? A. The constant growth model takes

Which of the following statements is CORRECT? A. The constant growth model takes into consideration then the capital gains investors expect to earn on a stock B. Two firms with th…

Which of the following statements is CORRECT? A. The more depreciation a firm re

Which of the following statements is CORRECT? A. The more depreciation a firm reports, the higher its tax bill, other things held constant. B. People sometimes talk about the firm…

Which of the following statements is CORRECT? A. Under current laws and regulati

Which of the following statements is CORRECT? A. Under current laws and regulations, corporations must use straight-line depreciation for all assets whose lives are 5 years or lon…

Which of the following statements is CORRECT? A. While the distinctions are beco

Which of the following statements is CORRECT? A. While the distinctions are becoming blurred, commercial banks generally specialize in lending money, whereas investment banks gene…