FINA3361SSII07MidtermKey

FINA3361SSII07MidtermKey - Saint Marys University*Finance...

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Unformatted text preview: Saint Marys University **Finance 3361** Midterm Exam Summer 2007 Student Name: Answer Key Student Number: Section: A (M & W 9:00 am 12:00 noon) B (M & W 5:30 pm 8:30 pm) INSTRUCTIONS Total Time Allowed: 3 hours Please read the questions carefully! TURN YOUR CELL PHONE OFF!! SHOW YOUR METHODOLOGY. Final answers carry near zero marks. State any assumption that you make. You are permitted to have pens, pencils and a calculator. No additional materials permitted. If you need additional space, use the back of the previous page. Organization Value Student Mark Part 1: Multiple Choice 24 Part 2 True or False 18 Part 3: Short Answers 6 Part 4: Problem 1 12 Problem 2 4 Problem 3 12 Problem 4 5 Problem 5 9 Problem 6 10 Problem 7 9 Total (includes 6 bonus marks) 106 Saint Marys University FINA3361 Summer 2007 PART I - MULTIPLE CHOICE : (24 Marks) CIRCLE THE MOST APPROPRIATE ANSWER TO EACH QUESTION. EACH QUESTION IS WORTH 2 MARKS. 1. The amount of systematic risk present in a particular risky asset, relative to the systematic risk present in an average risky asset, is called the particular asset's: a) Beta coefficient. b) Reward to risk ratio. c) Law of One Price. d) Diversifiable risk. e) Treynor index. 2. Unsystematic risk is defined as the risk that: a) Affects almost every financial asset that is sold in the marketplace. b) Relates to the overall economy, such as inflation and GDP growth. c) Serves as the basis for determining the amount of the risk premium. d) Is derived from an event that affects a single firm or a limited number of assets. e) Is generated by expected news. 3. A portfolio beta can be defined as the: a) Weighted average of the betas of the individual securities within the portfolio. b) Total of the betas of the individual securities within the portfolio. c) Amount of unsystematic risk remaining after the portfolio is diversified. d) Measure of the unsystematic risk of the portfolio relative to the level of market risk. e) Measure of the total risk of the portfolio in excess of the level of market risk. 4. The proportions of the market value of the firm's assets financed via debt, common stock, and preferred stock are called the firm's _____________________. a) financing costs b) portfolio weights c) beta coefficients d) capital structure weights e) costs of capital 5. WACC is the overall rate of return a firm must earn on its assets to maintain: a) Its current credit rating. b) Its current level of cash flows. c) The book value of its assets. d) The value of its stock. e) Its current cost of debt. 6. The appropriate cost of capital for a project depends on __________________. a) the risk associated with the project b) the type of security issued to finance the project c) the type of assets used in the project (that is, whether they are current or fixed assets) d) the total risk of the firm's equity e) the interest rate on the firm's outstanding long-term bonds 2 Saint Marys University FINA3361 Summer 2007 7. A corporation's first sale of equity made available to the public is called a(n):...
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This note was uploaded on 01/07/2012 for the course FIN 3361 taught by Professor Mishra during the Spring '11 term at Dalhousie.

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FINA3361SSII07MidtermKey - Saint Marys University*Finance...

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