FINC 2011 In-Semester Test 1 Master

# FINC 2011 In-Semester Test 1 Master - SURNAME FIRST NAME/S...

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Page 1 SURNAME: ______________________ FIRST NAME/S: _______________________ SID NUMBER: ________________________ Discipline of Finance FINC 2011 CORPORATE FINANCE I In-Semester Test 1 Summer School 2009 Master Copy Thursday 29 January 2009 Time Allowed: 60 minutes Format: 20 multiple choice questions each worth one mark Instructions : Circle the most correct answer on the answer sheet for each question. Only one answer should be circled for each question. Clearly indicate which answer is chosen. Authorised Material: 1. Calculator 2. Blue or black pen 3. Liquid paper 4. Student ID Card No other material is permitted within the exam room.

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Page 2 1. What is the corporate objective? a) To maximise capital b) To maximise shareholder wealth c) To minimise capital d) To minimise shareholder wealth e) To maximise current profits 2. Sovereign Ltd is planning on raising new debt capital through the issue of 10% p.a. quarterly coupon bonds with a face value of \$100. These bonds will mature in six years. If the current market yield is 12% p.a. compounded semi-annually, how much will each of Sovereign’s bonds cost? a) \$91.43 b) \$91.62 c) \$91.88 d) \$92.24 e) \$93.21 3. Mr Klein-Calvin deposits \$1000 in a two-year term deposit with BankEast Ltd. If BankEast is paying interest at a rate of 10% p.a. compounded semi-annually how much will Mr Klein-Calvin have accumulated in his account by the end of the term? a) \$1200.00 b) \$1210.00 c) \$1215.50 d) \$1223.75 e) \$1300.00 4. Diamond Asset Consultants (DAC) Ltd is looking at raising additional capital through the issue of 12% p.a. five year corporate bonds. These bonds will have a face value of \$100 and make coupon payments on a semi-annual basis. If the market rate on similar companies bonds is currently 10% pa, what will be the issue price of DAC’s corporate bonds? a) \$129.44 b) \$107.72 c) \$107.58 d) \$92.79 e) \$92.64 5. Which of these is the most effective way to encourage directors to make decisions that maximise the wealth of shareholders? a) Pay bonuses to the directors of the basis of the company’s earnings performance b) Impose fines on directors who fail to met predetermined earnings performance levels c) Discourage directors from becoming shareholders in the firm d) Encourage directors to become shareholders in the firm e) Reduce the number of non-executive board members
Page 3 6. What simple interest rate per year will give same value at the end of 3 years as 10% p.a. compounded semi-annually? a) 10.00% b) 10.25% c) 11.33% d) 11.50% e) 11.66% 7. Endeavour Enterprises is expected to pay a dividend of \$1.22 at the end of the current year and analysts predict that the dividend is expected to grow at a constant rate of 9% p.a. after that. If Endeavour Enterprises shareholders require a return of 8% p.a. on equity capital provided to the firm what will be its current share price? a) -\$122.00

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## This note was uploaded on 08/19/2011 for the course FINC 5001 taught by Professor Elivisjarnecic during the Three '11 term at University of Sydney.

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FINC 2011 In-Semester Test 1 Master - SURNAME FIRST NAME/S...

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