MGT201 Quiz # 4

by laila Fri Jan 06, 2012 5:45 am

MGT201 Online Quiz#4

Question # 1 of 15 ( Start time: 12:09:58 AM ) Total Marks: 1
An annuity due is always worth _____ a comparable annuity.
Select correct option:
Less than
More than
Equal to
Can not be found from the given information

Question # 2 of 15 ( Start time: 12:11:10 AM ) Total Marks: 1
Where the stock points will lie, if a stock is a part of totally diversified portfolio?
Select correct option:
It will lie below the regression line
It will line above the regression line
It will line exactly on the regression line
It will be tangent to the regression line

Question # 3 of 15 ( Start time: 12:11:47 AM ) Total Marks: 1
What is the easiest method to diversify away firm-specific risks?
Select correct option:
To buy stocks with a beta of 1.0
To build a portfolio with 5-10 individual stocks
To purchase the shares of a mutual fund
To purchase stocks that plot above the security market line

Question # 4 of 15 ( Start time: 12:12:23 AM ) Total Marks: 1
Nominal Interest Rate is also known as:
Select correct option:
Effective interest Rate
Annual percentage rate
Periodic interest rate
Required interest rate

Question # 5 of 15 ( Start time: 12:13:02 AM ) Total Marks: 1
When taxes are considered, the value of a levered firm equals the value of the________.
Select correct option:
Unlevered firm
Unlevered firm plus the value of the debt
Unlevered firm plus the present value of the tax shield
Unlevered firm plus the value of the debt plus the value of the tax shield

Question # 6 of 15 ( Start time: 12:14:15 AM ) Total Marks: 1
The __________ the coefficient of variation ________ the relative risk of the investment.
Select correct option:
Larger; Larger
Larger; Smaller
Smaller; Larger
Smaller; Smaller

Question # 7 of 15 ( Start time: 12:15:05 AM ) Total Marks: 1
Which of the following is correct regarding the opportunity cost of capital for a project?
Select correct option:
The opportunity cost of capital is the return that investors give up by investing in the
project rather than in securities of equivalent risk.
Financial managers use the capital asset pricing model to estimate the opportunity cost of capital
The company cost of capital is the expected rate of return demanded by investors in a
company
All of the given options

Question # 8 of 15 ( Start time: 12:15:46 AM ) Total Marks: 1
For which of the following costs is it generally necessary to apply a tax adjustment to a
yield measure?
Select correct option:
Cost of debt
Cost of preferred stock
Cost of common equity
Cost of retained earnings

Question # 9 of 15 ( Start time: 12:16:51 AM ) Total Marks: 1
What is difference between shares and bonds?
Select correct option:
Bonds are representing ownership whereas shares are not
Shares are representing ownership whereas bonds are not
Shares and bonds both represent equity
Shares and bond both represent liabilities

Question # 10 of 15 ( Start time: 12:17:16 AM ) Total Marks: 1
Which of the followings expressed the proposition that the cost of equity is a positive linear function of capital structure?
Select correct option:
The Capital Asset Pricing Model
M&M Proposition I
M&M Proposition II
The Law of One Price

Question # 11 of 15 ( Start time: 12:17:57 AM ) Total Marks: 1
The current yield on a bond is equal to ________.
Select correct option:
Annual interest divided by the current market price
The yield to maturity
Annual interest divided by the par value
The internal rate of return

Question # 12 of 15 ( Start time: 12:18:40 AM ) Total Marks: 1
When a bond will sell at a discount?
Select correct option:
The coupon rate is greater than the current yield and the current yield is greater than yield to maturity
The coupon rate is greater than yield to maturity
The coupon rate is less than the current yield and the current yield is greater than the yield to maturity
The coupon rate is less than the current yield and the current yield is less than yield to
Maturity

Question # 13 of 15 ( Start time: 12:19:17 AM ) Total Marks: 1
Which of the following formulas represents a correct calculation of the degree of operating leverage?
Select correct option:
(Q - QBE)/Q
(EBIT) / (EBIT - FC)
[Q(P-V) + FC] /[Q(P-V)]
Q(P-V) / [Q(P-V) - FC]

Question # 14 of 15 ( Start time: 12:19:31 AM ) Total Marks: 1
What are the Direct claim securities?
Select correct option:
The securities whose value depends on the cash flows generated by the underlying assets
The securities whose value depends on the value of the underlying assets
The securities that do not directly generate any returns for its investors
All of the given options

Question # 15 of 15 ( Start time: 12:20:16 AM ) Total Marks: 1
Companies and individuals running different types of businesses have to make the
choices of the asset according to which of the following?
Select correct option:
Life span of the project
Cost of the capital
Return on asset

None of the given opt