Wrong Answers Flashcards
Mary owns 100 shares of stock. Each share entitles her to 1 vote per open seat on the board of directors. Assume there are 3 open seats in the current election and Mary casts all 300 of her votes for a single candidate. What term is used to describe this type of voting?
Cumulative
The financial manager recognizes revenues and expenses utilizing
A the accrual method
B the actual inflows and outflows of cash
C the standardized, generally accepted, accounting principles
D the revenue method
The accrual method
An amortized loan:
A. requires the principle amount to be repaid in even increments over life of loan
B. may have equal or increasing amounts applied to principle from each loan payment
C. Requires that all interest be repaid on a monthly basis while the principal is repaid at the end of the loan term
D. Requires that all payments be equal in amount and include both principle and interest
B. may have equal or increasing amounts applied to the principle from each loan payment
Considering 2 mutually exclusive projects with conventional cash flows. The IRRs of projects A and B are 10% and 15% respectively. Which of the following statements is true about the net present values of the 2 projects?
A. Project A will have the higher NPV because IRR and NPV are inversely related
B. project B will have the higher NPV because IRR and NPV are positively related
C. It is possible for either project A or project B to have the higher NPV, depending on the discount rate (cost of capital)
D. The NPV of both projects must be positive because the IRR exceeds 0
C. It is possible for either project A or project B to have the higher NPV, depending on the discount rate (cost of capital)
Which of the following statements is most correct? (other things held constant)
A. The liquidity preference theory would generally lead to an upward sloping yield curve
B. the expectations theory would generally lead to an upward sloping yield curve
C. The yield curve under normal conditions should be horizontal
D. A downward sloping yield curve would suggest that investors expect inflation to increase in the future
A. The liquidity preference theory would generally lead to an upward sloping yield curve
Frank Lewis has a 30 year, $100,000 mortgage with a fixed, nominal interest rate of 10 percent (per year) and monthly compounding. Which of the following statements regarding the mortgage is most correct?
A. The monthly payments will decline over time
B. the proportion of monthly payment which represents interest will be lower for the last payment than for the first payment on the loan (the monthly interest payment decreases over the life of the loan)
C. The total dollar amount of principal being paid off each month gets larger as the loan approaches maturity
D. Statements a and c are correct
E. Statements b and c are correct
E. Statements b and c are correct
Stock A has a beta of 1.5 and stock B has a beta of 0.5. According to CAPM, which of the following statements must be true about these securities?
A. Stock A has a higher standard deviation than stock B
B. stock B has a higher standard deviation than stock A
C. The required return on stock A is greater than that on Stock B
D. The required return on Stock B is greater than that on Stock A
E. stock A has higher operating cash flows than stock B
C. The required return on stock A is greater than that on Stock B
