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Question 1 (1 point) A steak house takes a long position on cattle futures to limit its risk in the case of a cattle price increase.

Question 1 (1 point)

 

A steak house takes a long position on cattle futures to limit its risk in the case of a cattle price increase. Six months later the steak house wants to eliminate its obligation under this position before the futures contracts expire. What should the steak house do?

Question 1 options:


Buy Cows


Sell cows in the spot market. 


Deliver Cows to the Chicago Board of Trade


Take a short cattle futures contract position to offset the long position


Sell the long futures contracts. 

SaveQuestion 2 (1 point)

 

A common price for Nasonex in Europe is 9. The Dollar/Euro Exchange Rate is 1.0. According to PPP what should be the price of Nasonex in Dollars in the United States?

Your Answer:

Question 2 options:

Answer

SaveQuestion 3 (1 point)

 

An investor buys a call option on EBAY with a strike price 16.0, and a call premium of 4. If EBAY expires at 28, what profit did the investor make? Each option covers 100 shares of the underlying stock. 

Your Answer:

Question 3 options:

Answer

SaveQuestion 4 (1 point)

 

Give the order, in case of bankruptcy, of who gets paid off from first to last. 

Question 4 options:

1

2

3

4

5

Common Stock Holders

1

2

3

4

5

Taxes and Wages

1

2

3

4

5

Secured Creditors

1

2

3

4

5

Unsecured Bondholders

1

2

3

4

5

Preferred Stock Holders

SaveQuestion 5 (1 point)

 

Rank the following asset classes from highest to lowest in total returns over the last 50 years.

Question 5 options:

1

2

3

4

Gold

1

2

3

4

Small Stocks (Russell 2000)

1

2

3

4

Large Stocks (S&P 500)

1

2

3

4

Corporate Bonds

SaveQuestion 6 (1 point)

 

Ebling Inc. finances with 0.4 fraction debt, 0.1 fraction preferred and the remaining common stock. Ebeling's before tax cost of debt is 0.04, it cost of preferred stock is 0.10, and its cost of common stock is 0.20.  If Ebeling is subject to a 0.2 fraction corporate income tax, what is the company's Weighted Average Cost of Capital?

Your Answer:

Question 6 options:

Answer

SaveQuestion 7 (1 point)

 

Boer Inc. expects to pay a dividend 1.3 in one year, it's current stock price is 40.0. and its dividend growth rate is -0.02. If Boer's investment bankers charge a flotation cost of 0.09 as a fraction of the price of a new stock issue, what is Boer's cost of issuing new equity?

Your Answer:

Question 7 options:

Answer

SaveQuestion 8 (1 point)

 

Murphy Inc. preferred stock currently pays a dividend of 10 per year and has a yield of 0.09. What is the current price of Murphy's preferred stock?

Your Answer:

Question 8 options:

Answer

SaveQuestion 9 (1 point)

 

Consider the following cash flows: Co = -100, C01 = 80, C02 = 50.0, C03 = 20.0. What is the payback period?

Your Answer:

Question 9 options:

Answer

SaveQuestion 10 (1 point)

 

For a typical corporation rate the following costs from highest to lowest. 

Question 10 options:

1

2

3

4

The cost of retained earnings (rs)

1

2

3

4

The after tax cost of debt kd*(1 -Tc)

1

2

3

4

The weighted average cost of capital (WACC)

1

2

3

4

The cost of a new equity issue (re)

SaveQuestion 11 (1 point)

 

Hoffman Corporation is currently taking for 260 and has 36,000 shares outstanding. If Hoffman does a 2 for one stock split, what should the new stock price be?

Your Answer:

Question 11 options:

Answer

SaveQuestion 12 (1 point)

 

The euro is currently trading at 1.00 euros per dollar. The interest rate on the US Treasury Bill is 0.019 and the risk free interest rate in Europe is 0.007. What is the arbitrage free future exchange rate between the euro and the U.S. dollar for two years in the future in euros per dollar?

Your Answer:

Question 12 options:

Answer

SaveQuestion 13 (1 point)

 

Jasmine Inc has a Net Income of 500, a target equity fraction of 0.6, and a project new capital budget of 270. What should Jasmine's retained earnings be under the residual dividend model?

Your Answer:

Question 13 options:

Answer

SaveQuestion 14 (1 point)

 

A company with an average WACC of 10% adjusts for risk by adding 2% for high risk projects and subjecting 2% for low risk projects. Which of the following projects should the company accept?

Question 14 options:


An average risk project with an IRR of 10%


Low risk project with an IRR of 7%


High risk project with an IRR of 13%


High risk project with IRR of 11%

SaveQuestion 15 (1 point)

 

The expected rate of return on a Treasury Bill is 0.012, the expected rate of return on the Wilshire 5000 is 0.08 and the required rate of return of a stock is 0.13. What is the stocks beta?

Your Answer:

Question 15 options:

Answer

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