ActSc 371 - Midterm 1_solutions_FINAL

ActSc 371 - Midterm 1_solutions_FINAL - ActSc 371 Midterm...

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ActSc 371 Midterm 1- October 12, 2011 g Corporate Finance 1 Instructor: Dr. Lysa Porth Aids: non-programmable calculator This examination contains: Part 1: Multiple Choice (MC) Part 2: Short Answer (WA) Part 3: LonG Answer (LA) Total Mark Total for Each Part 16 12 29 57 Student Score Instructions: You have 50 minutes to complete this midterm exam. The exam consists of three parts, and the value each is indicated beside the question. This midterm accounts for 12.5% of your final grade. For MC type questions, please circle your answer. For SA and LA type questions, please answer the question in the space provided, being sure to show sufficient work . If you use your financial calculator to arrive at the final answer, be sure to write the corresponding formula as well as the values for each of the input variables. Please print clearly. Your work must be legible to receive full marks. Good luck! ID Number: ________________________________ Last Name:_________________________________ First Name:______________________________
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ActSc 371 Midterm 1- October 12, 2011 g Part One: Circle the correct answer for the following multiple choice questions. (16 marks) . 1. If a firm has debt outstanding the contingent claim of an equity holder is: (2 marks) A) Equal to the debt payment plus the residual cashflow of the firm. B) Equal to the payment to debtholders. C) Equal to the firm cashflows minus the fixed debt payment if the residual cashflows are positive. D) Equal to the firm cashflows minus the fixed debt payment whether positive or negative. E) None of the above. Solution: C 2. The general partner(s) in a general partnership agree to share work, costs and profits and losses. Each partner: (2 marks) A) Has liability for the debts of the partnership. B) Has liability only up the amount of their investment. C) Has liability only if it is formally documented. D) Never has any liability but the limited partners do. E) None of the above. Solution: A 3. An effective annual interest rate of 15% per year could be expressed as: (2 marks) A) 7.5% per 6 months compounded semi-annually. B) 14.22% per year compounded quarterly. C) 14.476% per year compounded semi-annually. D) 30.455% per year compounded every decade. E) Both b) and c) F) Both b) and d) G) Both c) and d) H) All of a), b) and c) I) All of b), c) and d) J) None of the above. Solution: I Convert all to annual effective rate and compare to r = 0.15 A) 155625 . 0 1 075 . 1 2 = - = r B) 149964 . 0 1 4 1422 . 0
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This note was uploaded on 12/16/2011 for the course ACSTC 371 taught by Professor Lisaporth during the Fall '11 term at Waterloo.

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ActSc 371 - Midterm 1_solutions_FINAL - ActSc 371 Midterm...

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