1. You have a portfolio with a beta of 1.46. What will the new portfolio beta be if you keep 75 percent of your money in the old portfolio and 25 percent in a stock with a beta of 0.6?
A. 1.25
B. 1.14
C. 1.67
D. 1.31
2. What process significantly decreases the value of a future amount to the present?
A. The Rule of 72
B. Compounding
C. Present value
D. Discounting
3. What's another name commonly used for junk bonds?
A. Debentures
B. Mortgage bonds
C. Equipment trust certificates
D. High-yield bonds
4. The theory that at any given point in time, the yield curve reflects the market's current expectations of future short-term rates is known as the _______ theory.
A. efficient market
B. liquidity premium
C. unbiased expectations
D. market segmentation
5. You own $12,000 of stock in Company A. The stock has a beta of 2.8. You also own $7,500 of stock in Company B, which has a beta of 1.3, and $4,500 of stock in Company C, which has a beta of 0.3. What's the beta of your portfolio?
A. 1.98
B. 1.86
C. 1.68
D. 0.84
6. An 8 percent corporate coupon bond is callable in seven years for a call premium of one year of coupon payments. Assuming a par value of $1,000, what's the price paid to the bondholder if the issuer calls the bond?
A. $1,040
B. $1,160
C. $1,080
D. $920
7. In 2015, Camilla's Pet Stores, Inc., reported an ROA of 9.24 percent, ROE of 15.8 percent, and profit margin of 21.2 percent. The firm had total assets equal to $12.8 million at the end of 2015. What's common stockholders' equity as of year-end 2015 for Camilla's Pet Stores, Inc.?
A. $7.5 million
B. $6.7 million
C. $8.1 million
D. $9.3 million
8. What happens when a firm issues debt to finance its assets?
A. The firm's capital structure doesn't change.
B. Stockholders surrender their rights to dividends but not capital gains.
C. Debt holders are entitled to receive the same amount of dividends as stockholders.
D. It gives the debt holders first claim to a fixed amount of its cash flows.
9. What's the future value of $600 deposited for one year earning an interest rate of 8 percent per year?
A. $636
B. $652
C. $648
D. $664
10. In finance, level sets of frequent cash flows are called
A. capital gains.
B. dividends.
C. depreciation.
D. annuities.
11. The balance sheet of Acme Landscaping and Horticulture shows current assets of $584,000, fixed assets of $862,313, current liabilities of $498,000, and long-term debt of $234,500. Calculate the company's total stockholders' equity.
A. $713,813
B. $924,813
C. $1,446,313
D. $627,813
12. If the risk-free rate is 5 percent and the risk premium is 7 percent, what's the required return?
A. 12 percent
B. 2 percent
C. 15 percent
D. –2 percent
13. The existing or current one-, two-, and three-year zero coupon Treasury security rates were as follows:
1R1 = 0.80 percent
1R2 = 1.26 percent
1R3 = 1.85 percent
Using the unbiased expectations theory, what would the one-year forward rates on zero coupon Treasury bonds be for two and three years, respectively?
A. Two years = 2.14 percent; three years = 2.56 percent
B. Two years = 1.72 percent; three years = 3.04 percent
C. Two years = 3.65 percent; three years = 2.12 percent
D. Two years = 2.25 percent; three years = 4.10 percent
14. To analyze performance meaningfully, what must ratio results be interpreted against?
A. ROE
B. The discount rate
C. A standard or benchmark
D. The time value of money (TVM)
15. Year-to-date, Company A has earned a 5.90 percent return. During the same period, Company B has earned 8.65 percent, and Company C has earned 14.30 percent. What's your portfolio return if you have a portfolio made up of the following?
45 percent Company A
35 percent Company B
20 percent Company C
A. 8.54
B. 9.38
C. 13.41
D. 5.42
16. Superior Widgets Manufacturing reported a debt-to-equity ratio of 1.9 times at the end of 2015. If the company's total debt at the end of the year was $29 million, how much equity does Superior Widgets have on its balance sheet?
End of exam
A. $17.2 million
B. $16.8 million
C. $15.3 million
D. $14.9 million
17. What's the present value of a $1,800 annuity payment over 7 years and an interest rate of 9 percent?
A. $10,440
B. $9,060
C. $12,243
D. $8,246
18. What's the current yield of a 4.8 percent coupon corporate bond with three years until maturity quoted at a price of $98.24?
A. 4.86 percent
B. 6.32 percent
C. 5.12 percent
19. According to the Rule of 72, approximately what interest rate is earned when an investment doubles over 4 years?
A. 12 percent
B. 6 percent
C. 24 percent
D. 18 percent
20. You're valuing Horn of Plenty Mining, Inc.'s, stock in order to compare its value to its market price. You believe that the company will pay total dividends of $1.45 in 2015 and $1.56 in 2016. You also believe the company's stock price will be $35.80 at the end of 2016. If the appropriate discount rate is 12 percent, what's the value of Horn of Plenty Mining's stock?
A. $38.31
B. $37.43
C. $39.22
D. $36.87
