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Midterm+Exam+-+Solution - Midterm Exam - Econ. 393 Section...

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Midterm Exam - Econ. 393 Section B6 - Summer 2010 - Instructor: Diep Duong Student: ___________________________________________________________________________ Please identify the letter of choice that best completes the statement - Good Luck ! 1. A firm has a debt-equity ratio of 0.42. What is the total debt ratio? A. 0.30 B. 0.36 C. 0.44 D. 1.58 E. 2.38 2. Which one of the following is a source of cash? A. increase in accounts receivable B. decrease in notes payable C. decrease in common stock D. increase in accounts payable E. increase in inventory 3. A business partner whose potential financial loss in the partnership will not exceed his or her investment in that partnership is called a: A. generally partner. B. sole proprietor. C. limited partner. D. corporate shareholder. E. zero partner. 4. A firm has 160,000 shares of stock outstanding, sales of \$1.94 million, net income of \$126,400, a price- earnings ratio of 18.7, and a book value per share of \$9.12. What is the market-to-book ratio? A. 1.62 B. 1.84 C. 2.23 D. 2.45 E. 2.57

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5. The interest rate risk premium is the: A. additional compensation paid to investors to offset rising prices. B. compensation investors demand for accepting interest rate risk. C. difference between the yield to maturity and the current yield. D. difference between the market interest rate and the coupon rate. E. difference between the coupon rate and the current yield. 6. Which one of the following correctly describes the dividend yield? A. next year's annual dividend divided by today's stock price B. this year's annual dividend divided by today's stock price C. this year's annual dividend divided by next year's expected stock price D. next year's annual dividend divided by this year's annual dividend E. the increase in next year's dividend over this year's dividend divided by this year's dividend 7. Assume that the market prices of the securities that trade in a particular market fairly reflect the available information related to those securities. Which one of the following terms best defines that market? A. riskless market B. evenly distributed market C. zero volatility market D. Blume's market E. efficient capital market 8. You are considering two projects with the following cash flows: Which of the following statements are true concerning these two projects? I. Both projects have the same future value at the end of year 4, given a positive rate of return. II. Both projects have the same future value given a zero rate of return. III. Project X has a higher present value than Project Y, given a positive discount rate. IV. Project Y has a higher present value than Project X, given a positive discount rate. A. II only B. I and III only C. II and III only D. II and IV only E. I, II, and IV only
9. The formula which breaks down the return on equity into three component parts is referred to as which one of the following? A. equity equation

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This note was uploaded on 07/01/2010 for the course ECON 393 taught by Professor D during the Spring '10 term at Rutgers.

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Midterm+Exam+-+Solution - Midterm Exam - Econ. 393 Section...

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