Financial Management
291. A series of consecutive cash flows of equal amounts is known as:
- a present value
- a compound sum
- a present sum
- an annuity
Correct answer: (D)
an annuity
292. To an investor, the most desirable compounding period is:
- Annually
- semi-annually
- monthly
- daily
Correct answer: (D)
daily
293. The market required rate of return depends on:
- the present value of future cash flows
- the market's perceived level of risk associated with the individual security
- the yield to maturity
- 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:
- is determined by government regulations
- equates principal and interest payments to the price of the bond
- is constant with varying maturities
- 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:
- the variance and standard deviation
- the expected value and standard deviation
- the arithmetic mean and variance
- the arithmetic mean and standard deviation
Correct answer: (B)
the expected value and standard deviation
296. The portfolio effect analyzes:
- the return on the portfolio
- the risk of the portfolio
- the impact of a given investment on the overall risk level
- 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:
- the market for corporate bonds dwarfs the market for stock
- the percentage of bond financing is affected by common share prices
- interest rate levels are less significant than common share prices
- 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:
- they aid in the allocation of capital
- they provide liquidity to investors
- securities are initially placed in the secondary market
- 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:
- the consolidation of financial resources among a few large firms
- the acquisition of retail brokerage firms
- the increase in bond underwriting
- 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:
- a public firm is taken private
- cash is borrowed to finance the purchase
- equity is usually sold to pay off the debt
- a corporate restructuring normally follows
Correct answer: (C)
equity is usually sold to pay off the debt