eng120-fall04-mt1-Oren-soln

eng120-fall04-mt1-Oren-soln - E120 Fall 04 Prof Oren...

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E120 Fall 04, Prof Oren Midterm 1 Key Part 1: Concepts. (25 points, 5 each) 1.1). The possibility of conflict of interest between the stockholders and management of the firm is called: a. The shareholders’ conundrum. b. Corporate breakdown. c. The agency problem. d. Corporate activism. e. Legal liability Answer: C 1.2) Which of the following would most likely be considered the most liquid asset? a. A share of IBM common stock. c. A piece of collectible artwork. d. A lot of commercial real estate. e. A share of Citibank preferred stock. Answer: a 1.3) You are evaluating two annuities. They are identical in every way, expect that one is an ordinary annuity and the other is an annuity due. Which of the following is FALSE? a. The ordinary annuity must have a lower present value than the annuity due. b. The ordinary annuity must have a lower future value than the annuity due. c. The annuity due must have the same present value as the ordinary annuity. d. The two annuities will differ in present value by a factor of (1+r). e. The annuity due and the ordinary annuity will make the same number of payments over time. Answer: C 1.4) Which bond would most likely posses the LEAST degree of interest rate risk? a. 8% coupon rate, 10 years to maturity
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eng120-fall04-mt1-Oren-soln - E120 Fall 04 Prof Oren...

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