Financial Management

291. A series of consecutive cash flows of equal amounts is known as:

  1. a present value
  2. a compound sum
  3. a present sum
  4. an annuity
Correct answer: (D)
an annuity

292. To an investor, the most desirable compounding period is:

  1. Annually
  2. semi-annually
  3. monthly
  4. daily
Correct answer: (D)
daily

293. The market required rate of return depends on:

  1. the present value of future cash flows
  2. the market's perceived level of risk associated with the individual security
  3. the yield to maturity
  4. the valuation of the financial asset
Correct answer: (B)
the market's perceived level of risk associated with the individual security

294. The yield to maturity on a bond:

  1. is determined by government regulations
  2. equates principal and interest payments to the price of the bond
  3. is constant with varying maturities
  4. tends to move inversely with share prices
Correct answer: (B)
equates principal and interest payments to the price of the bond

295. The two most important measures of risk are:

  1. the variance and standard deviation
  2. the expected value and standard deviation
  3. the arithmetic mean and variance
  4. the arithmetic mean and standard deviation
Correct answer: (B)
the expected value and standard deviation

296. The portfolio effect analyzes:

  1. the return on the portfolio
  2. the risk of the portfolio
  3. the impact of a given investment on the overall risk level
  4. none of the above are correct
Correct answer: (C)
the impact of a given investment on the overall risk level

297. With respect to corporate bonds, all of the following are true except:

  1. the market for corporate bonds dwarfs the market for stock
  2. the percentage of bond financing is affected by common share prices
  3. interest rate levels are less significant than common share prices
  4. corporate bond markets are dominated in size by the stock market
Correct answer: (D)
corporate bond markets are dominated in size by the stock market

298. Which of the following statements about securities markets is incorrect:

  1. they aid in the allocation of capital
  2. they provide liquidity to investors
  3. securities are initially placed in the secondary market
  4. the keep prices competitive among alternative security investments
Correct answer: (C)
securities are initially placed in the secondary market

299. Perhaps the biggest change of all in the investment industry has been:

  1. the consolidation of financial resources among a few large firms
  2. the acquisition of retail brokerage firms
  3. the increase in bond underwriting
  4. the increasing generalization of investment firms
Correct answer: (A)
the consolidation of financial resources among a few large firms

300. Under a leveraged buy-out scenario, all of the following are true except:

  1. a public firm is taken private
  2. cash is borrowed to finance the purchase
  3. equity is usually sold to pay off the debt
  4. a corporate restructuring normally follows
Correct answer: (C)
equity is usually sold to pay off the debt
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