Sample Quiz #3 Answers

Sample Quiz #3 Answers - Finance 351: Financial Management...

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1 Finance 351: Financial Management Instructor: Shuming Liu Sample Quiz 3 1. Capital structure decisions refer to the: A) dividend yield of the firm's stock. B) blend of equity and debt used by the firm. C) capital gains available on the firm's stock. D) maturity date for the firm's securities. Answer: B See the textbook P366 or Ch. 13 Slide #3. 2. The appropriate opportunity cost of capital is the return that investors give up on alternative investments with: A) the same risk. B) the risk-free return. C) the expected return on the S&P 500 index. D) the normal, common stock risk premium. Answer: A See Ch. 13 Slide #3. 3. An investor receives a 15% total return by purchasing a stock for $40 and selling it after one year with a 5% capital gain. How much was received in dividend income during the year? A) $2.00 B) $2.20 C) $4.00 D) $6.00 Answer: C price share initial dividend gain capital return Percentage 15% = $40 $40x5% dividend 15% = $40 dividend $2 $4 $2 - $40 15% dividend
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2 4. When the overall market experiences a decline of 8%, an investor with a portfolio of aggressive stocks will probably experience: A) negative portfolio returns of less than 8%. B) negative portfolio returns of greater than 8%. C) positive portfolio returns of less than 8%. D) positive portfolio returns of greater than 8%. Answer: B See the textbook P340 or Ch. 12 Slide #4. 5. What nominal return was received by an investor when inflation averaged 8.0% and the real rate of return was a negative 2.5%? A) 5.30%
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Sample Quiz #3 Answers - Finance 351: Financial Management...

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