428prelim1_S08

428prelim1_S08 - AEM 428 Valuation Prelim 1 1 hour 15...

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AEM 428 Valuation Prelim 1 1 hour 15 minutes 106 points Multiple Choices (6 questions, 4 points each): 1) If the five-year spot rate is 5%, the present value of a risk-free cash flow of $200 to be received in five years is: a) $157 b) $190 c) $205 d) $255 In a strong-form efficient market, accounting announcements: a) will impact stock price only if it is related to cash flows b) will impact stock price if it involves new public information c) will impact stock price if it affects a firm's ability to borrow funds d) will not impact stock price 3) The proper discount rate for the firm’s dividend stream is: a) The firm’s weighted average cost of capital (WACC) b) The WACC plus an adjustment for the business risk of the firm c) The after-tax cost of debt d) The firm’s cost of equity capital. 4) Approximately what percentages of stocks are recalled in a given month? a) 0.2% b) 2% c) 10% d) 20% 5) What item is not included in other comprehensive income? a) foreign exchange adjustment b) minimum pension liability c) unrealized gain on security available for sale d) net income 6) If stock returns follow a random walk, you should: a. employ a mean reversion investment trading strategy b. base trades on recurring patterns in stock prices c. not attempt to find a predictable pattern in stock returns d. employ an industry-based momentum trading strategy e. all of the above
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428prelim1_S08 - AEM 428 Valuation Prelim 1 1 hour 15...

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