1. The user of an asset in a leasing arrangement is called the:
2. The owner of an asset in a leasing arrangement is called the:
Return, Risk, and the Security Market Line
1. A portfolio is:
a. a group of assets, such as stocks and bonds, held as a collective unit by an investor.
b. the expected return on a risky asset.
c. the expected return
Options and Corporate Finance
1. A financial contract that gives its owner the right, but not the obligation, to buy or
a specified asset at an agreed-upon price on or before a given future date is called
a(n) _ co
Case Discussion Questions
1. For the three main US market segments in power tools, which is most attractive?
How are the segments purchasing behaviors different and which is most
Consumer (home use buyers), Professional-Tradesmen (P-T) (contrac
Economics 4410, Winter 2014
Final Exam Practice Problems with Answers
1.When a security is added to a portfolio the appropriate return and risk contributions are:
A) the expected return of the asset and its standard deviation.
B) the most
CHAPTER 22 Options and Corporate Finance
Multiple Choice Questions: I. DEFINITIONS
OPTIONS a 1. A financial contract that gives its owner the right, but not the obligation, to buy or sell a specified asset at an agreed-upon price on or before a given futu
Risk Management: An Introduction to Financial Engineering
1. _ is the process of reducing a firms exposure to price or rate fluctuations.
d. Value minimization
Mergers and Acquisitions
1. The complete absorption of one company by another, wherein the acquiring firm
retains its identity and the acquired firm ceases to exist as a separate entity, is called
1. The purchase of both a stock and a put option on the stock to limit the downside risk
associated with the stock is a strategy called the:
a. put-call parity relation.
b. covered call.
Project Analysis and Evaluation
1. The possibility that errors in projected cash flows can lead to incorrect estimates of
net present value is called _ risk.
d. Monte Ca
Net Present Value and Other Investment Criteria
NET PRESENT VALUE
1. The difference between the present value of an investment and its cost is the:
a. net present value.
b. internal rate of return.
c. payback period.
Making Capital Investment Decisions
INCREMENTAL CASH FLOWS
1. The changes in a firms future cash flows that are a direct consequence of accepting a
project are called _ cash flows.
Some Lessons from Capital Market History
1. The excess return required from a risky asset over that required from a risk-free asset
is called the:
a. risk premium.
b. geometric premium.
c. excess return.
1. The financing provided for start-up, often high-risk, private business enterprises is
a. venture capital.
b. junk bonds.
c. flotation costs.
d. initial public offerings.
e. financial f
Financial Leverage and Capital Structure Policy
1. The use of personal borrowing to change the overall amount of financial leverage to
which an individual is exposed is called:
a. homemade leverage.
Dividends and Dividend Policy I. DEFINITIONS
DIVIDENDS a 1. Payments made out of a firms earnings to its owners in the form of cash or stock are called: a. dividends. b. distributions. c. share repurchases. d. payments-in-kind. e. stock splits.
Short-Term Finance and Planning
1. The length of time between the acquisition of inventory and the collection of cash
from receivables is called the:
a. operating cycle.
b. inventory period.
c. accounts receivab
Credit and Inventory Management
TERMS OF SALE
1. The conditions under which a firm sells its goods and services for cash or credit are
a. terms of sale.
b. credit analysis.
c. collection policy.
d. payables policy.
Cash and Liquidity Management
1. The need to hold cash to take advantage of additional investment opportunities is
called the _ motive.
International Corporate Finance
AMERICAN DEPOSITORY RECEIPT
1. A security issued in the United States that represents shares of a foreign stock and
allows that stock to be traded in the United States is called a(n):