quiz-ch12 - Questions in [New Questions] 1) Which of the...

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Sheet1 Page 1 Questions in [New Questions] 1) Which of the following are correct statements? I. Financial leverage is the extent to which a firm relies on debt financing. II. Operating leverage refers to a firm's use of debt in its capital structure. III. A levered firm uses some debt in its capital structure. IV. Asset beta equals the beta of the common stock of an all-equity firm. [ ] I and III only [ ] II and IV only [ ] I, II, and III only [ ] II, III, and IV only v [ ] I, III, and IV only 2) Financial leverage directly _____ the _____ beta. [ ] increases asset [ ] decreases asset v [ ] increases equity [ ] decreases equity [ ] does not affect asset beta or the equity 3) When a specialist is picked off, that specialist: I. had more information concerning the transaction than did the other party. II. would be considered more of an uninformed trader than an informed trader. III. was subjected to adverse selection. IV. tends to earn a higher return on the transaction than otherwise would have been earned. [ ] I and III only [ ] II and IV only [ ] I and IV only v [ ] II and III only [ ] I, III, and IV only 4) The common stock of The Holiday Express sells for $46.50. The firm's beta is 1.6, the risk-free rate is 3. [ ] 10.84 percent [ ] 12.49 percent v [ ] 16.92 percent [ ] 17.37 percent [ ] 18.11 percent 5) You have gathered the following information concerning the four outstanding bond issues of a firm: Coupon RateFace ValuePrice Quote 6.30 percent$63 million1.022 8.75 percent$48 million.927 7.25 percent$12 million1.010 What is the total market value of the debt? [ ] $97.472 million [ ] $116.903 million v [ ] $121.002 million [ ] $128.710 million [ ] $131.050 million 6) The beta of security i is equal to the _____ divided by the: v [ ] covariance of the secu variance of the market.
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Sheet1 Page 2 [ ] covariance of the secu beta of the market. [ ] standard deviation of t variance of the market. [ ] variance of the securit variance of the market. [ ] covariance of the secu standard deviation of the market. 7) Which one of the following statements is correct? [ ] The larger the percentage of uninformed traders to informed traders, the larger the spread on the secu [ ] Uninformed traders tend to pick off specialists. [ ] Uninformed traders of a stock raise the return on equity. v [ ] The larger the ratio of informed to uninformed traders of a stock, the higher the cost of capital to the is [ ] The liquidity level of all stocks is relatively equal. 8) Swift Water Mills sold a 10-year bond issue last year. The issue has a 6.65 percent semiannual coupon v [ ] 4.18 percent [ ] 4.27 percent [ ] 4.35 percent [ ] 6.34 percent [ ] 6.65 percent 9) Northern Electric sold 30-year bonds 3 years ago. The bonds pay a 6.5 percent annual coupon and have [ ] 5.87 percent [ ] 6.01 percent [ ] 6.23 percent v [ ] 6.46 percent [ ] 6.78 percent 10) Webster Wood Works is considering three projects. Project A has a beta of 0.74 and a projected return [ ] A only [ ] B only [ ] C only
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This note was uploaded on 06/15/2008 for the course ACC 501 504 taught by Professor Na during the Spring '08 term at University of Texas at Austin.

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quiz-ch12 - Questions in [New Questions] 1) Which of the...

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