Liquidity refers to the existence of secondary markets.
True False
Investments are made in anticipation of a return.
True False
The investor should specify the goals of investing.
True False
CFA is a professional designation for individuals seeking positions as portfolio managers.
True False
An informed investor can expect to consistently outperform the market.
True False
Which of the following is an investment as defined by an economist?
A.
|
equipment
| |
B.
|
land
| |
C.
|
savings account
| |
D.
|
stock
|
Efficient markets suggests that few investors will outperform the market consistently.
True False
Portfolio assessment should include measures of both risk and return.
True False
Many investments such as stock have common characteristics including
1. existence of secondary markets
2. risk
3. potential for capital gains
1. existence of secondary markets
2. risk
3. potential for capital gains
A.
|
all of the above
| |
B.
|
1 and 3
| |
C.
|
2 and 3
| |
D.
|
1 and 2
|
Stocks are initially sold in the “primary” market and subsequently traded in the “secondary” market.
True False
Investments are made in anticipation of a return.
True False
Risk
A.
|
refers to the uncertainty of returns
| |
B.
|
should be maximized to increase returns
| |
C.
|
is reduced through specialization
| |
D.
|
depends solely on price fluctuations
|
Risk is the uncertainty that the anticipated return will not be realized.
True False
Discounting
A.
|
brings the future back to the present
| |
B.
|
depends on the rate of interest
| |
C.
|
expresses the present in the future
| |
D.
|
is synonymous with compounding
|
The present value of an annuity due exceeds the present value of an ordinary annuity.
True False
The future value of a dollar
1. increases with higher interest rates
2. decreases with higher interest rates
3. increases as the time period increases
4. decreases as the time period increases
1. increases with higher interest rates
2. decreases with higher interest rates
3. increases as the time period increases
4. decreases as the time period increases
A.
|
1 and 4
| |
B.
|
2 and 4
| |
C.
|
1 and 3
| |
D.
|
2 and 3
|
The present value of an annuity due is not affected by the frequency of compounding.
True False
The present value of an annuity is
1. larger the greater the rate of interest
2. smaller the greater the rate of interest
3. larger as the number of years increases
4. smaller as the number of years increases
1. larger the greater the rate of interest
2. smaller the greater the rate of interest
3. larger as the number of years increases
4. smaller as the number of years increases
A.
|
2 and 3
| |
B.
|
1 and 4
| |
C.
|
1 and 3
| |
D.
|
2 and 4
|
The concept of the time value of money is a means to bring together the present and the future.
True False
Capital gains and income are the sources of the return on an investment.
True False
Which of the following is not an investment in the layperson's general use of the term?
A.
|
savings account
| |
B.
|
stock
| |
C.
|
equipment
| |
D.
|
land
|
The term "investment" in economics generally refers to the purchase of stock and bonds.
True False
Time value concepts may not be used to determine
A.
|
the margin required on a stock purchase
| |
B.
|
the future value of $100 deposited in a bank
| |
C.
|
the present value of an annuity
| |
D.
|
the present value of a lump sum
|
If the first payment made by an annuity is today, that is an “ordinary annuity” and not an “annuity due.”
True False
Compounding refers to the earning of interest on interest earned previously.
True False
The future value of an annuity is
1. larger the higher the rate of interest
2. smaller the higher the rate of interest
3. larger the greater the number of years
4. smaller the greater the number of years
1. larger the higher the rate of interest
2. smaller the higher the rate of interest
3. larger the greater the number of years
4. smaller the greater the number of years
A.
|
2 and 4
| |
B.
|
2 and 3
| |
C.
|
1 and 3
| |
D.
|
1 and 4
|
The per share net asset value of the shares in a closed-end investment company depends on the difference between the fund's assets and liabilities and the number of shares outstanding.
True False
As a result of arbitrage, ETFs tend to sell for their net asset value.
True False
A hedge fund is a conservative type of mutual fund.
True False
Since ETFs mimic an index, they do not buy individual shares of stock.
True False
A hedge fund
A.
|
is a public financial institution
| |
B.
|
is open to a select number of individual investors
| |
C.
|
has its shares registered with the Federal Reserve
| |
D.
|
has actively traded shares
|
Many unit trusts are self-liquidating.
True False
Examples of capital gains include sales of
1. IRA accounts
2. stocks sold for a profit
3. real estate sold for a profit
1. IRA accounts
2. stocks sold for a profit
3. real estate sold for a profit
A.
|
1 and 3
| |
B.
|
2 and 3
| |
C.
|
1 and 2
| |
D.
|
all of the above
|
Which of the following is included in an individual’s cash budget?
A.
|
home mortgage owed
| |
B.
|
credit card balances
| |
C.
|
social security payments
| |
D.
|
common stock
|
If a closed-end investment company sells for a discount,
A.
|
its price exceeds the net asset value
| |
B.
|
dividend income exceeds capital gains
| |
C.
|
its price is less than the net asset value
| |
D.
|
capital gains exceed dividend income.
|
A 401(k) plan is a
A.
|
plan to increase current tax-exempt income
| |
B.
|
dividend or interest enhancement plan
| |
C.
|
tax-deferred retirement plan
| |
D.
|
savings plan for the retired
|
The efficient market hypothesis says that no one can outperform the market.
True False
If an investor believes that financial markets are inefficient, that argues for the individual to pursue a more active portfolio strategy.
True False
When a seller executes a repurchase agreement, the seller agrees to repurchase the asset at a lower price.
True False
The Treynor index standardizes performance by the portfolio's beta.
True False
Commercial paper is
A.
|
a short-term secured debt of a corporation
| |
B.
|
a long-term secured debt of a corporation
| |
C.
|
a long-term unsecured debt of a corporation
| |
D.
|
a short-term unsecured debt of a corporation
|
Funds that perform well in one year tend to earn consistently higher returns in subsequent years.
True False
A money market mutual fund is an illustration of a no-load fund.
True False
Acquiring shares in no load funds is one means to avoid 12b-1 fees.
True False
If an investor believes that financial markets are inefficient, that argues for the individual to pursue a more active portfolio strategy and purchase exchange-traded funds instead of individual stocks.
True False
Hedge fund strategies may include buying one stock while shorting another.
True False
A loading fee charged by a mutual fund does not apply to a closed-end investment company.
True False
The shares of hedge funds are registered with the SEC.
True False
Many exchange-traded funds limit their portfolios to
A.
|
stocks included in an aggregate measure of stock prices
| |
B.
|
high quality securities
| |
C.
|
stocks that respond to changes in consumer prices (the Consumer Price Index or CPI)
| |
D.
|
stocks and bonds of companies in a particular industry
|
If a closed-end investment company specializes in the securities of one sector of the economy, systematic risk is reduced.
True False
Distributions from a closed-end investment are subject to federal income taxation.
True False
The efficient market hypothesis requires
1. financial markets to be competitive
2. prices to adjust rapidly
3. prices of undervalued securities to fall
1. financial markets to be competitive
2. prices to adjust rapidly
3. prices of undervalued securities to fall
A.
|
1 and 3
| |
B.
|
1 and 2
| |
C.
|
all of the above
| |
D.
|
2 and 3
|
Securities prices tend to adjust slowly as new information is disseminated in an inefficient market.
True False
Investing in stocks purchased by insiders may generate superior investment results and that is inconsistent with the strong form of the efficient market hypothesis.
True False
Which of the following is not illustrative of a tax-sheltered retirement plan?
A.
|
401(k) plans
| |
B.
|
life insurance
| |
C.
|
Keogh account
| |
D.
|
IRAs
|
An IRA is a tax-deferred pension plan for the self-employed.
True False
An index fund limits its portfolio to
A.
|
high quality securities
| |
B.
|
stocks that respond to changes in the consumer prices (i.e., Consumer Price Index)
| |
C.
|
stocks of firms in a particular industry
| |
D.
|
stocks included in an aggregate measure of stock prices
|
Acquiring shares in no load funds is one means to avoid 12b-1 fees.
True False
Beta coefficients may be computed for investment companies and used to compute risk-adjusted rates of return.
True False
Empirical studies of returns earned by mutual funds suggest they consistently outperform the market.
True False
The S&P 500 stock index may be an inappropriate benchmark for a small-cap fund.
True False
Investments in mutual funds permit the investor to avoid market risk.
True False
Which of the following is a consideration when selecting a mutual fund?
1. portfolio turnover
2. 12b-1 fees
3. unrealized losses in the fund's portfolio
1. portfolio turnover
2. 12b-1 fees
3. unrealized losses in the fund's portfolio
A.
|
2 and 3
| |
B.
|
1 and 2
| |
C.
|
all of the above
| |
D.
|
1 and 3
|
Short-term capital losses are used to offset long-term losses for the purpose of taxation.
True False
The first exchange-traded funds (ETFs) were a type of index fund.
True False
If foreign securities markets are as efficient as U. S. securities markets, then foreign investments may offer the U. S. investor no advantages over investing in domestic securities.
True False
Which of the following is not a consideration for investing in real estate investment trusts (REITs)?
A.
|
excessive use of debt financing by some REITs
| |
B.
|
fluctuating interest rates affecting securities valuations
| |
C.
|
fluctuations in dividend payments
| |
D.
|
the federal tax rate paid by the trust
|
The portfolios of international funds
A.
|
stress European securities
| |
B.
|
exclude U. S. securities
| |
C.
|
specialize in the securities of one country
| |
D.
|
are a diversified mix of securities from all countries with security markets
|
Closed-end investment companies with beta coefficients less than 1.0
A.
|
have less systematic risk than the market
| |
B.
|
have more systematic risk than the market
| |
C.
|
have outperformed the market
| |
D.
|
have underperformed the market
|
Hedge funds follow investment strategies such as
A.
|
underwriting new issues (IPOs)
| |
B.
|
limiting their portfolios to money market instruments
| |
C.
|
shorting “overvalued” stocks while buying “undervalued” stocks
| |
D.
|
acquiring shares in mutual funds
|
The amount of an outstanding mortgage appears on the individual's balance sheet.
True False
Which of the following is excluded from an individual’s cash budget?
A.
|
retirement account
| |
B.
|
alimony
| |
C.
|
wages and salary
| |
D.
|
social security tax payments
|
The efficient market hypothesis suggests that the current prices of stocks reflect what the investment community believes the stocks are worth.
True False
According to the efficient market hypothesis, purchasing high P/E stock should produce higher returns.
True False
An individual's net worth is determined by subtracting liabilities from assets.
True False
Which of the following is true?
A.
|
Mutual funds report returns before adjusting for taxes.
| |
B.
|
Exchange-traded funds exchange their portfolios.
| |
C.
|
Small cap funds cannot have load fees.
| |
D.
|
12b-1 fees exceed a fund's NAV.
|
Commercial paper is
A.
|
a short-term unsecured debt of a corporation
| |
B.
|
a long-term unsecured debt of a corporation
| |
C.
|
a short-term secured debt of a corporation
| |
D.
|
a long-term secured debt of a corporation
|
In order to sell securities to the general public, a mutual fund must register its securities and prepare a prospectus detailing its objectives and costs to investors.
True False
Which of the following is not an investment company?
A.
|
a commercial bank
| |
B.
|
a money market mutual fund
| |
C.
|
an index fund
| |
D.
|
a growth mutual fund
|
A mutual fund has a fixed capital structure.
True False
If mutual funds make investments in efficient financial markets, they
A.
|
cannot outperform the market consistently
| |
B.
|
should not outperform the market consistently
| |
C.
|
will underperform the market when securities prices decline
| |
D.
|
primarily bear unsystematic risk
|
The payout ratio is dividends divided by earnings.
True False
A major advantage associated with dividend reinvestment plans is forced saving.
True False
Dividend reinvestment plans are a means to postpone federal income tax on dividends.
True False
Earnings per preferred share are
A.
|
the ratio of earnings to number of preferred shares
| ||
B.
|
earnings before interest and taxes
| ||
C.
|
the ratio of preferred shares to common shares
| ||
D.
|
the ratio of EBIT to number of preferred shares
|
Firms with too much debt are undercapitalized.
True False
Preferred stock generally pays
A.
|
no dividend
| |
B.
|
a fixed dividend
| |
C.
|
a variable dividend
| |
D.
|
a stock dividend
|
Stockholders in a publicly held corporation have limited liability.
True False
The return on assets employs operating income instead of net income.
True False
The current ratio and the quick ratio are measures of asset usage.
True False
Preferred stock dividends are
1. a legal obligation
2. not a legal obligation
3. exempt from federal income taxation
4. not exempt from federal income taxation
1. a legal obligation
2. not a legal obligation
3. exempt from federal income taxation
4. not exempt from federal income taxation
A.
|
2 and 3
| |
B.
|
1 and 3
| |
C.
|
2 and 4
| |
D.
|
1 and 4
|
The dividend-growth valuation model depends on dividends and the required rate of return.
True False
According to the efficient market hypothesis, purchasing low P/S stocks should produce superior investment results.
True False
The required rate of return includes the risk-free rate and a risk premium.
True False
An increase in the risk-free rate will tend to decrease stock prices.
True False
According to the efficient market hypothesis, purchasing companies with high cash flow should produce superior investment results.
True False
The use of price to book ratios to select stocks suggests that
A.
|
low price to book stocks are overvalued
| |
B.
|
a stock should be purchased if it is selling near its historic high price to book ratio
| |
C.
|
high price to book stocks should be purchased
| |
D.
|
a stock should be purchased if it is selling near its historic low price to book ratio
|
The use of P/E ratios to select stocks suggests that
A.
|
low P/E ratio stocks are overvalued
| |
B.
|
a stock should be purchased if it is selling near its historic high P/E
| |
C.
|
a stock should be purchased if it is selling near its historic low P/E
| |
D.
|
high P/E stocks should be purchased
|
If the financial markets were not efficient,
A.
|
prices indicate the proper valuation of securities
| |
B.
|
an investor may consistently outperform the market
| |
C.
|
all investors would profit
| |
D.
|
prices would adjust rapidly
|
A low price to sales ratio suggests
A.
|
the firm has no earnings
| |
B.
|
the firm is generating cash
| |
C.
|
the stock may be undervalued
| |
D.
|
the stock valuation is too high
|
Value investors tend to prefer stocks with low price to sales and price to book ratios.
True False
Owners of bonds would prefer
1. a debt ratio of 60 percent to a debt ratio of 40 percent
2. a debt ratio of 40 percent to a debt ratio of 60 percent
3. a times-interest-earned of 5.1 to a times-interest-earned of 3.9
4. a times-interest-earned of 3.9 to a times-interest-earned of 5.1
1. a debt ratio of 60 percent to a debt ratio of 40 percent
2. a debt ratio of 40 percent to a debt ratio of 60 percent
3. a times-interest-earned of 5.1 to a times-interest-earned of 3.9
4. a times-interest-earned of 3.9 to a times-interest-earned of 5.1
A.
|
1 and 4
| |
B.
|
2 and 4
| |
C.
|
2 and 3
| |
D.
|
1 and 3
|
The net profit margin increases as the firm’s interest expense declines.
True False
Preferred stock pays a fixed amount of interest.
True False
Operating income is not affected by
A.
|
cost of goods sold
| |
B.
|
interest earned
| |
C.
|
depreciation
| |
D.
|
rent payments
|
Most stockholders of publicly held stock have pre-emptive rights.
True False
The relationship between a firm and its state of incorporation is specified in the bylaws.
True False
Which of the following has no impact on cash flow?
A.
|
the firm's equity
| |
B.
|
net income
| |
C.
|
taxes paid
| |
D.
|
depreciation expense
|
The ex-dividend date follows the date of record.
True False
Stock dividends increase
A.
|
the firm's equity
| |
B.
|
the firm's assets
| |
C.
|
the number of shares outstanding
| |
D.
|
the stock's price
|
A higher beta decreases the required rate of return.
True False
A low price to sales ratio suggests
A.
|
the stock may be undervalued
| |
B.
|
the firm is generating cash
| |
C.
|
the firm has no earnings
| |
D.
|
the stock valuation is too high
|
The dividend-growth valuation model depends on dividends and the required rate of return.
True False
An increase in the risk-free rate will tend to decrease stock prices.
True False
Investors may use P/E ratios and price/sales ratios to value stocks. If this analysis is used, which of the following is desirable?
A.
|
a high P/E and a high price/sales ratio
| |
B.
|
a low P/E and a low price/sales ratio
| |
C.
|
a high P/E and a low price/sales ratio
| |
D.
|
a low P/E and a high price/sales ratio
|
Use of P/E ratios will not produce superior investment results according to the
A.
|
all forms of the efficient market hypothesis
| |
B.
|
strong form of the efficient market hypothesis
| |
C.
|
semi-strong form of the efficient market hypothesis
| |
D.
|
weak form of the efficient market hypothesis
|
If the anticipated return exceeds the required rate of return, the investor should buy the stock.
True False
The dividend-growth model requires that dividends grow annually at the same rate.
True False
According to the efficient market hypothesis, purchasing high P/E stock should not produce superior investment results.
True False
If the financial markets were not efficient,
A.
|
all investors would profit
| |
B.
|
prices would adjust rapidly
| |
C.
|
an investor may consistently outperform the market
| |
D.
|
prices indicate the proper valuation of securities
|
Which of the following is a cash outflow?
A.
|
splitting the stock two for one
| |
B.
|
acquiring inventory
| |
C.
|
retaining earnings
| |
D.
|
switching from straight-line depreciation to accelerated depreciation
|
High P/E stocks should be preferred because they pay larger dividends.
True False
A stock's price will tend to fall if
1. the firm's beta declines
2. the firm's beta increases
3. the risk-free rate declines
4. the risk-free rate increases
1. the firm's beta declines
2. the firm's beta increases
3. the risk-free rate declines
4. the risk-free rate increases
A.
|
2 and 3
| |
B.
|
1 and 4
| |
C.
|
2 and 4
| |
D.
|
1 and 3
|
If the ratio of price to book exceeds 1.0,
A.
|
the stock is overvalued
| |
B.
|
the accounting value of the firm is greater than the market value of the firm
| |
C.
|
the price of the stock is greater than the accounting value of the firm
| |
D.
|
the firm's assets are understated
|
According to the efficient market hypothesis, purchasing high P/E stock should not produce superior investment results.
True False
If the required rate of return is 10 percent and the stock pays a fixed $5 dividend, its value is
A.
|
$50
| |
B.
|
$75
| |
C.
|
$25
| |
D.
|
$100
|
Analysis of preferred stock uses
A.
|
operating income (EBIT)
| |
B.
|
earnings after taxes
| |
C.
|
earnings after dividends to common stock
| |
D.
|
earnings after interest but before taxes
|
The more financially leveraged a firm, the smaller is its debt ratio.
True False
The relationship between a firm and its state of incorporation is specified in the bylaws.
True False
Stockholders generally have which of the following rights?
1. right to vote
2. right to share in the firm's earnings
3. right to sell the stock
1. right to vote
2. right to share in the firm's earnings
3. right to sell the stock
A.
|
1 and 3
| |
B.
|
all of the above
| |
C.
|
2 and 3
| |
D.
|
1 and 2
|
The proportion of a firm's assets that are financed by debt is measured by the debt ratio.
True False
Earnings are
A.
|
retained and/or distributed
| |
B.
|
distributed
| |
C.
|
retained
| |
D.
|
invested
|
Reasons for saving and investing include
1. need for funds to meet emergencies
2. retirement income
3. desire to leave an estate for children
1. need for funds to meet emergencies
2. retirement income
3. desire to leave an estate for children
A.
|
all of the above
| |
B.
|
2 and 3
| |
C.
|
1 and 2
| |
D.
|
1 and 3
|
The anticipated return and the realized return often differ.
True False
American investors may acquire shares in mutual funds that specialize in foreign investments.
True False
A mortgage trust is a REIT that specializes in mortgage loans.
True False
Many exchange-traded funds limit their portfolios to
A.
|
stocks included in an aggregate measure of stock prices
| |
B.
|
high quality securities
| |
C.
|
stocks and bonds of companies in a particular industry
| |
D.
|
stocks that respond to changes in consumer prices (the Consumer Price Index or CPI)
|
The discount paid for the shares of a closed-end investment company is fixed by the firm.
True False
Pension plans permit investors to defer income tax.
True False
Capital losses may not be used to offset capital gains.
True False
One of the first steps an investor should take is to establish the goals of the portfolio.
True False
If financial markets are efficient, that suggests that
A.
|
security prices are random
| |
B.
|
bearing additional risk will not increase return
| |
C.
|
investors cannot expect to outperform the market consistently
| |
D.
|
investors cannot earn superior returns
|
A small firm may offer a Roth IRA instead of a 401(k).
True False
The present value of an annuity increases as the number of years increases.
True False
Which is the largest if interest rates are 7 percent?
A.
|
the future value of a $100 annuity for three years
| |
B.
|
the present value of $100 after three years
| |
C.
|
$100 compounded for three years
| |
D.
|
the present value of a $100 annuity
|
Which is the smallest if interest rates are 8 percent?
A.
|
$100 to be received after five years
| |
B.
|
the present value of an annuity of $100 for 5 years
| |
C.
|
$100 received in the present
| |
D.
|
$100 received for two years
|
Time value concepts may be used to determine
1. the annual growth rate in dividends
2. the amount in an IRA account after ten years
3. the tax owed on a capital gain
1. the annual growth rate in dividends
2. the amount in an IRA account after ten years
3. the tax owed on a capital gain
A.
|
only 2
| |
B.
|
2 and 3
| |
C.
|
1 and 3
| |
D.
|
1 and 2
|
The future value of an annuity of $100 at 6 percent for ten years exceeds $1,000.
True False
Stock dividends increase the firm's cash.
True False
Dividend policy depends on
1. the firm's earnings
2. investment opportunities available to the firm
3. corporate income taxes
1. the firm's earnings
2. investment opportunities available to the firm
3. corporate income taxes
A.
|
2 and 3
| |
B.
|
1 and 2
| |
C.
|
1 and 3
| |
D.
|
all of the abov
|
If the ratio of debt to equity increases, the proportion of assets financed by debt is increased.
True False
Stock splits and stock dividends increase the earning capacity of the firm.
True False
Coverage ratios may be used to measure the safety of debt and other fixed obligations.
True False
An increase in assets financed by equity increases the debt ratio.
True False
A P/E ratio depends on
1. the firm's dividends
2. the price of the stock
3. the firm's per share earnings
1. the firm's dividends
2. the price of the stock
3. the firm's per share earnings
A.
|
all of the above
| |
B.
|
1 and 3
| |
C.
|
1 and 2
| |
D.
|
2 and 3
|
According to the dividend-growth model, the valuation of common stock depends on
1. the firm's dividends
2. investors' required rate of return
3. the prior year's dividends
1. the firm's dividends
2. investors' required rate of return
3. the prior year's dividends
A.
|
1 and 2
| |
B.
|
1 and 3
| |
C.
|
all of the above
| |
D.
|
2 and 3
|
The PEG ratio combines a stock’s earnings, price, and growth rate.
True False
The dividend-growth valuation model depends on dividends and the required rate of return.
True False
One of the major advantages associated with liquid money market securities is safety of principal.
True False
Treasury bills have no risk of default but risk of loss of interest payments.
True False
The shares of load mutual fund sell for a discount from their net asset value.
True False
Which of the following should not have default risk?
A.
|
negotiable certificates of deposit
| |
B.
|
treasury bills
| |
C.
|
money market mutual funds
| |
D.
|
commercial paper
|
When a firm makes a profitable sale, its total assets increase.
True False
Financial investments are made in efficient markets. The existence of these markets suggests that
A.
|
investors cannot earn superior returns
| |
B.
|
investors cannot expect to outperform the market consistently
| |
C.
|
security prices are random
| |
D.
|
bearing additional risk will not increase return
|
The only costs of investing in a closed-end investment company are the commissions to buy and sell the shares.
True False
A unit trust is a passive investment that holds a fixed portfolio of securities such as federal government bonds.
True False
The amount in a Keogh account appears on the investor's estimate of cash receipts and disbursements.
True False
A retirement account for the self-employed is called a
A.
|
10-K report
| |
B.
|
tax-deferred annuity
| |
C.
|
401(k) plan
| |
D.
|
Keogh account (HR10 account)
|
Possible investment objectives may include
1. capacity to meet financial emergencies
2. preservation of capital
3. desire to finance retirement
1. capacity to meet financial emergencies
2. preservation of capital
3. desire to finance retirement
A.
|
1 and 3
| |
B.
|
all of the above
| |
C.
|
2 and 3
| |
D.
|
1 and 2
|
If an investment company were liquidated, the investor should receive the net asset value.
True False
No-load funds with 12b-1 fees are able to charge their existing shareholders for marketing expenses.
True False
High tax efficiency suggests that a fund’s after-tax return is comparable to its before-tax return.
True False
A Eurodollar CD is a certificate of deposit issued in the United States by a foreign bank.
True False
The net asset value of a stock mutual fund rises with
A.
|
larger number of shares
| |
B.
|
lower stock prices
| |
C.
|
higher stock prices
| |
D.
|
increased liabilities
|
Stock dividends cause
A.
|
the value of the firm to fall
| |
B.
|
the price of a share of stock to rise
| |
C.
|
the price of a share of stock to fall
| |
D.
|
the value of the firm to rise
|
The gross profit margin on sales tends to exceed the operating profit margins on sales.
True False
Repurchases of shares may be viewed as an alternative to paying cash dividends.
True False
Inventory turnover may increase if
A.
|
the firm uses less debt financing
| |
B.
|
the firm lowers the prices of its goods
| |
C.
|
the firm increases its accounts payable
| |
D.
|
the firm increases its inventory
|
The future value of an annuity is
1. larger the higher the rate of interest
2. smaller the higher the rate of interest
3. larger the greater the number of years
4. smaller the greater the number of years
1. larger the higher the rate of interest
2. smaller the higher the rate of interest
3. larger the greater the number of years
4. smaller the greater the number of years
A.
|
1 and 3
| |
B.
|
1 and 4
| |
C.
|
2 and 4
| |
D.
|
2 and 3
|
If a bank pays 2 percent compounded daily, the true rate of interest is greater than 2 percent.
True False
The present value of a dollar
1. increases as the interest rate increases
2. decreases as the interest rate increases
3. increases as the time period increases
4. decreases as the time period increases
1. increases as the interest rate increases
2. decreases as the interest rate increases
3. increases as the time period increases
4. decreases as the time period increases
A.
|
2 and 4
| |
B.
|
2 and 3
| |
C.
|
1 and 4
| |
D.
|
1 and 3
|
Only the earnings, and not the amount invested, are taxed when distributed from a 401(k).
True False
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