BFIN 350 CHP 4 EXAM QUESTIONS WITH ALL CORRECT ANSWERS GRADED A+
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BFIN 350 CHP 4
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BFIN 350 CHP 4
BFIN 350 CHP 4 EXAM QUESTIONS WITH ALL CORRECT ANSWERS GRADED A+
What is the plug variable? - Answer-It is the cash surplus or shortfall that will be shown when the projected balance sheets are not in sync
What are the economic assumptions? - Answer-the plan should expicitly describe the econo...
BFIN 350 CHAPTER 5-9 TEST QUESTIONS
WITH COMPLETE SOLUTIONS GRADED A+
Best definition of Growing perpetuity - Answer-A constant stream of cash flows without
end that is expected to rise indefinitely
Best definition of a growing annuity - Answer-A finite number of growing annual cash
flows
Best definition of an effective annual rate - Answer-The interest rate expressed as if it
were compounded once per year
You are planning to save your christmas bonuses from work and are comparint savings
accounts: Account A compounds semi-annually while account B compounds monthly. If
both accounts have the same effective annual rate of interest and you place only the
bonuses in the account, you should choose - Answer-Either since you would be
indifferent between the two
Sensitivity to interest rate risk is directly dependent on - Answer-Time to maturity and
coupon rate
If the required rate of return on a bond does not change from one year to the next then -
Answer-the price of a bond selling at par will remain unchanged over the same period
(ignoring changes in default risk)
The rate of return earned by an investor who purchases a bond today and holds it for
the remainder of the term is called the - Answer-Yield to maturity
All else equal, the market value of a corporate bond is always inversely related to its -
Answer-Yield to maturity
Stocks are different from bonds because - Answer-stocks, unlike bonds, represent
residual ownership
The voting procedure where shareholders grant authority to another individual to vote
their shares - Answer-proxy voting
Preferred stock is a type of - Answer-zero growth stock
The required return is defined as - Answer-the capital gains yield plus the dividend yield
The dividend growth model assumed that - Answer-the rate of growth is constant
Complete the following decision rule: project should be accepted if its
exceeds the firm's required rate of return - Answer-IRR
The profitability index - Answer-produces a ranking on all projects
The difference between the market value of an investment and its cost - Answer-Net
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