Fundamentals of Corporate Finance, 12e (Ross)
Chapter 24 Option Valuation
1) Travis owns a stock that is currently valued at $45.80 a share. He is concerned that the stock price may decline so he just purchased a put option on the stock with an exercise price of $45. Which one of the following terms applies to this strategy?
A) Put-call parity
B) Covered call
C) Protective put
D) Straddle
E) Strangle
2) According to put-call parity, the present value of the exercise price is equal to the:
A) stock price plus the call premium minus the put premium.
B) call premium plus the put premium minus the stock price.
C) stock price minus the put premium minus the call premium.
D) put premium plus the call premium minus the stock price.
E) stock price plus the put premium minus the call premium.
3) In the put-call parity formula, the present value of the exercise price is computed using the:
A) nominal market rate.
B) real market rate.
C) real inflation rate.
D) nominal inflation rate.
E) risk-free rate.
4) Which one of the following provides the option of selling a stock at a specified price on a stated date even if the market price of the stock declines to zero?
A) American call
B) European call
C) American put
D) European put
E) Either an American or European put
5) The primary purpose of a protective put is to:
A) ensure a maximum purchase price in the future.
B) offset an equivalent call option.
C) limit the downside risk of asset ownership.
D) lock in a risk-free rate of return on a financial asset.
E) increase the upside potential return on an investment.
6) Which one of the following can be used to replicate a protective put strategy?
A) Riskless investment and stock purchase
B) Stock purchase and call option
C) Call option and riskless investment
D) Riskless investment and writing a put
E) Call option, stock purchase, and riskless investment
7) Which one of these is most equivalent to e? Rt?
A) ?2.71828Rt
B) ?1/2.71828Rt
C) 1/2.71828Rt
D) 1 ? 2.71828Rt
E) 1/2.71828R t
8) Under European put-call parity, the present value of the strike price is equivalent to the present value of:
A) the current value of the stock minus the call premium.
B) the market value of the stock plus the put premium.
C) a U.S. Treasury coupon bond with a face value equal to the strike price.
D) a U.S. Treasury bill with a face value equal to the strike price.
E) any risk-free security with a face value equal to the strike price and a coupon rate equal to the risk-free rate of return.
9) In the Black-Scholes option pricing formula, N(d1) is the probability that a standardized, normally distributed random variable is:
A) less than or equal to N(d2).
B) less than 1.
C) equal to 1.
D) equal to d1.
E) less than or equal to d1.
10) In the Black-Scholes option pricing model, the symbol "σ" is used to represent the standard deviation of the:
A) option premium on a call with a specified exercise price.
B) rate of return on the underlying asset.
C) volatility of the risk-free rate of return.
D) rate of return on a risk-free asset.
E) option premium on a put with a specified exercise price.
11) All of the following affect the value of a call option except the:
A) strike price.
B) stock price.
C) standard deviation of the returns on a risk-free asset.
D) continuously compounded risk-free rate.
E) time to maturity.
12) To compute the value of a put using the Black-Scholes option pricing model, you:
A) assume the equivalent call is worthless and then apply the put-call parity formula.
B) have to compute the value of the put as if it is a call and then apply the put-call parity formula.
C) subtract the value of an equivalent call from 1.0.
D) subtract the value of an equivalent call from the market price of the stock.
E) multiply the value of an equivalent call by e?rt.
13) Which one of the following statements is correct?
A) The price of an American put is equal to the stock price minus the exercise price.
B) The value of a European call is greater than the value of a comparable American call.
C) The value of a put is equal to one minus the value of an equivalent call.
D) The value of a put minus the value of a comparable call is equal to the value of the stock minus the exercise price.
E) The value of an American put will equal or exceed the value of a comparable European put.
14) Which one of the following cannot be either used by or calculated by the Black-Scholes option pricing model?
A) Risk-free rate of return
B) Premium on an American call option
C) Time to maturity greater than one year
D) Underlying asset value
E) An exercise price equal to the face value of a firm's debt
15) When computing the value of a call option using the Black-Scholes option pricing model, d2 is calculated as:
A) σt.5? 1.
B) 1 ? σt.5.
C) d1? σt.5.
D) 1 + σt.5.
E) d1+ σt.5.
16) Which one of the following statements related to options is correct?
A) American stock options can be exercised but not resold.
B) A European call is either equal to or less valuable than a comparable American call.
C) European puts can be resold but can never be exercised.
D) European options can be exercised on any dividend payment date.
E) American options are valued using the Black-Scholes option pricing model.
17) Assume all stocks are non-dividend paying. Given this assumption, which one of these statements is correct regarding stock options?
A) European put options are more valuable than comparable American put options.
B) Exercising a well-into-the-money American put option is generally not a good idea.
C) It is never optimal to exercise an American call option early.
D) You should wait to exercise a put option if the stock price falls to zero.
E) You are better off exercising an in-the-money call option than selling it.
18) Assume the risk-free rate increases by one percent. Which one of the following measures the effect this change will have on the value of a firm's stock options?
A) Theta
B) Vega
C) Delta
D) Rho
E) Gamma
19) Which one of the following defines the relationship between the value of an option and the option's time to expiration?
A) Theta
B) Vega
C) Rho
D) Delta
E) Gamma
20) Assume the standard deviation of the returns on ABC stock increases. This change will
________ the value of the call options and ________ the value of the put options on ABC stock.
A) increase; decrease
B) increase; increase
C) decrease; decrease
D) decrease; increase
E) not effect; not effect
21) Assume the risk-free rate increases. This change will ________ the value of call options and ________ the value of put options on shares of stock.
A) increase; decrease
B) increase; increase
C) decrease; decrease
D) decrease; increase
E) not affect; not affect
22) The estimate of the future volatility of the returns on the underlying asset that is computed using the Black-Scholes option pricing model is referred to as the:
A) residual error.
B) implied mean return.
C) derived case volatility.
D) forecast rho.
E) implied standard deviation.
23) The value of a call option delta is best defined as a value that is:
A) between zero and one.
B) less than zero.
C) greater than zero.
D) greater than or equal to zero.
E) less than or equal to zero.
24) Given a small change in the value of the underlying stock, the change in an option's price is approximately equal to the change in stock value:
A) divided by delta.
B) divided by (1 ? Delta).
C) divided by (1 + Delta).
D) multiplied by (1 ? Delta).
E) multiplied by delta.
25) If the price of the underlying stock decreases, then the value of the call options ________ and the value of the put options ________.
A) decrease; decrease
B) decrease; increase
C) increase; decrease
D) increase; increase
E) increase; remain unchanged
26) Which one of the following statements is correct?
A) Increasing the time to maturity may not increase the value of a European put.
B) An increase in time decreases the value of a call option.
C) Exercising an American option is always more valuable than selling the option.
D) Call options tend to be less sensitive to the passage of time than are put options.
E) Vega measures the sensitivity of an option's value to the passage of time.
27) Theta measures an option's:
A) intrinsic value.
B) volatility.
C) rate of time decay.
D) sensitivity to changes in the value of the underlying asset.
E) sensitivity to changes in the risk-free rate.
28) Selling a call option is generally more valuable than exercising the option because of the option's:
A) riskless value.
B) intrinsic value.
C) standard deviation.
D) exercise price.
E) time premium.
29) Which one of the following statements is correct?
A) The value of a call option decreases as the time to expiration increases.
B) A decrease in the risk-free rate decreases the value of a put option.
C) Increasing the risk-free rate decreases the value of a call option.
D) The value of a put option increases when the standard deviation of the returns on the underlying stock increase.
E) Increasing the strike price decreases the value of a put option.
30) A decrease in which of the following will increase the value of a put option on a stock?
A) Strike price and standard deviation of the returns on the underlying stock
B) Stock price and risk-free rate
C) Time to expiration and strike price
D) Risk-free rate and standard deviation of the returns on the underlying stock
E) Time to expiration and stock price
31) Which one of the five factors included in the Black-Scholes option pricing model cannot be directly observed?
A) Risk-free rate
B) Strike price
C) Standard deviation
D) Stock price
E) Life of the option
32) Which one of the following statements related to the implied standard deviation (ISD) is correct?
A) The ISD is an estimate of the historical standard deviation of the underlying security.
B) ISD is equal to (1 ? d1).
C) The ISD estimates the volatility of an option's price over the option's lifespan.
D) The value of ISD is dependent upon both the risk-free rate and the time to option expiration.
E) ISD confirms the observable volatility of the return on the underlying security.
33) The implied standard deviation used in the Black-Scholes option pricing model is:
A) based on historical performance.
B) a prediction of the volatility of the return on the underlying asset over the life of the option.
C) a measure of the time decay of an option.
D) an estimate of the future value of an option given a strike price e.
E) a measure of the historical intrinsic value of an option.
34) The value of an option is equal to the:
A) intrinsic value minus the time premium.
B) time premium plus the intrinsic value.
C) implied standard deviation plus the intrinsic value.
D) summation of the intrinsic value, the time premium, and the implied standard deviation.
E) summation of delta, theta, vega, and rho.
35) For the equity of a firm to be considered a call option on the firm's assets, the firm must:
A) be in default.
B) be leveraged.
C) pay dividends.
D) have a negative cash flow from operations.
E) have a negative cash flow from assets.
36) Paying off a firm's debt is comparable to ________ on the assets of the firm.
A) purchasing a put option
B) purchasing a call option
C) exercising an in-the-money put option
D) exercising an in-the-money call option
E) writing a put option
37) The shareholders of a firm will benefit the most from a positive net present value project when the delta of the call option on the firm's assets is:
A) equal to one.
B) between zero and one.
C) equal to zero.
D) between zero and minus one.
E) equal to minus one.
38) The value of the risky debt of a firm is equal to the value of:
A) a call option plus the value of a risk-free bond.
B) a risk-free bond plus a put option.
C) the equity of the firm minus a put.
D) the equity of the firm plus a call option.
E) a risk-free bond minus a put option.
39) A firm has assets of $16.4 million and 2-year, zero-coupon, risky bonds with a total face value of $7.4 million. The bonds have a total current market value of $7.1 million. The shareholders of this firm can change these risky bonds into risk-free bonds by purchasing a ________ option with a 2-year life and a strike price of ________ million.
A) call; $7.1
B) call; $7.4
C) put; $16.4
D) put; $7.1
E) put; $7.4
40) Purely financial mergers:
A) are beneficial to stockholders.
B) are beneficial to both stockholders and bondholders.
C) are detrimental to stockholders.
D) add value to both the total assets and the total equity of a firm.
E) reduce both the total assets and the total equity of a firm.
41) A purely financial merger:
A) increases the risk that the merged firm will default on its debt obligations.
B) has no effect on the risk level of the firm's debt.
C) reduces the value of the option to go bankrupt.
D) has no effect on the equity value of a firm.
E) reduces the risk level of the firm thereby increasing the value of the firm's equity.
42) Which one of the following statements is correct?
A) Mergers benefit shareholders but not creditors.
B) Positive NPV projects will automatically benefit both creditors and shareholders.
C) There may be conflicts between the interests of bondholders and shareholders.
D) Creditors prefer negative NPV projects while shareholders prefer positive NPV projects.
E) Mergers rarely affect bondholders.
43) If the risk-free rate is 6.5 percent compounded annually, what is the continuously compounded risk-free rate equal to?
A) 1/ln1.065
B) 6.10%
C) ln1.065
D) 6.24%
E) e1.065? 1
44) This morning, Kate put a European protective put strategy in place when the cost of ABC stock was $29.15 per share and the 1-year $30 ABC put was priced at $1.05 per share. How much profit per share will she earn from this strategy if the stock is worth $28 a share on the put expiration date?
A) $7.80
B) ?$1.05
C) ?$.20
D) $8.85
E) $1.25
45) You need $15,400 in three years. How much do you need to deposit today to fund this need if you can earn 5 percent per year, compounded continuously? Assume this is the only deposit you make.
A) $13,506
B) $13,049
C) $14,179
D) $13,255
E) $12,916
46) A stock is selling for $62 per share. A call option with an exercise price of $65 sells for $3.85 and expires in three months. The risk-free rate of interest is 2.8 percent per year, compounded continuously. What is the price of a put option with the same exercise price and expiration date?
A) $6.74
B) $6.23
C) $6.67
D) $6.40
E) $6.95
47) A put option that expires in eight months with an exercise price of $55 sells for $7.34. The stock is currently priced at $52, and the risk-free rate is 3.1 percent per year, compounded continuously. What is the price of a call option with the same exercise price and expiration date?
A) $5.67
B) $5.47
C) $5.34
D) $4.71
E) $4.92
48) Today, you purchased 300 shares of Lazy Z stock for $49.80 per share. You also bought three 1-year, $50 put options on Lazy Z stock at a cost of $.55 per share. What is the maximum total amount you can lose over the next year on these purchases?
A) ?$15,105
B) ?$11,050
C) ?$160
D) ?$105
E) $0
49) Today, Ted purchased 500 shares of ABC stock at a price of $42.20 per share. He also purchased five put option contracts on ABC at a price of $.10 per share, an exercise price of $40 and a 1-year term. What is the maximum loss Ted can realize on his investments over the next year?
A) ?$1,105
B) ?$1,050
C) ?$1,115
D) ?$1,150
E) $0
50) Webster United stock is priced at $35.79 per share. The 6-month $35 call options are priced
at $1.40 and the risk-free rate is 3.2 percent, compounded continuously. What is the per share value of the 6-month put option?
A) $.15
B) $.05
C) $0
D) $.20
E) $.25
51) Day's End stock is selling for $43 a share. The 6-month call with a strike price of $45 is priced at $.30. Risk-free assets are currently returning 4.1 percent per year, compounded continuously. What is the price of a 6-month put with a strike price of $45?
A) $1.39
B) $1.46
C) $1.28
D) $1.51
E) $1.32
52) The one-year call on TLM stock with a strike price of $65 is priced at $2.20 while the one-year put with a strike price of $65 is priced at $11.18. The annual risk-free rate is 3.8 percent, compounded continuously. What is the current price of TLM stock?
A) $53.60
B) $48.90
C) $56.70
D) $50.10
E) $47.65
53) Grocery Express stock is selling for $22 a share. A three-month, $20 call on this stock is priced at $2.85. Risk-free assets are currently returning .2 percent per month. What is the price of a three-month put on Grocery Express stock with a strike price of $20?
A) $.37
B) $.73
C) $.87
D) $1.10
E) $1.18
54) J&N stock has a current market price of $51.97 a share and the annual risk-free rate is 4.2 percent, compounded continuously. The 1-year call on this stock with a strike price of $55 is priced at $2.30. What is the price of the one-year put with a strike price of $55?
A) $3.07
B) $2.86
C) $3.22
D) $2.94
E) $2.99
55) You invest $2,500 today at 5.5 percent, compounded continuously. How much will this investment be worth 12 years from now?
A) $3,728
B) $4,837
C) $4,311
D) $3,422
E) $3,791
56) Todd invested $12,000 in an account today at 4.5 percent, compounded continuously. What will this investment be worth in 15 years?
A) $26,203
B) $25,845
C) $24,287
D) $25,941
E) $23,568
57) WT Foods stock is selling for $38 a share. The 6-month $40 call on this stock is selling for $2.01 while the 6-month $40 put is priced at $3.60. What is the continuously compounded risk-free rate of return?
A) 2.7 percent
B) 2.4 percent
C) 1.8 percent
D) 1.5 percent
E) 2.1 percent
58) The stock of EHI has a current market value of $21.50 a share. The 3-month call with a strike price of $20 is selling for $2.07 while the 3-month put with a strike price of $20 is priced at $.41. What is the continuously compounded risk-free rate of return?
A) 2.9 percent
B) 3.0 percent
C) 4.1 percent
D) 3.7 percent
E) 3.2 percent
59) A call option with an exercise price of $25 and 9 months to expiration has a price of $4.92. The stock is currently priced at $26.90, and the risk-free rate is 4.1 percent per year, compounded continuously. What is the price of a put option with the same exercise price and expiration date?
A) $3.89
B) $1.57
C) $1.24
D) $2.69
E) $2.26
60) What is the value of a 6-month put with a strike price of $27.50 if the stock price is $22.60, the 6-month $27.50 call is priced at $1.46, and the risk-free rate is 3.5 percent, compounded continuously?
A) $4.71
B) $5.43
C) $5.24
D) $5.88
E) $6.62
61) A stock is priced at $52.90 a share, the 3-month $45 call is priced at $9.31 a share, and the risk-free rate is 4.5 percent, compounded continuously. What is the value of the 3-month put with a strike price of $45?
A) $.57
B) $.63
C) $.91
D) $1.36
E) $1.54
62) A stock is currently priced at $38. A call option with an expiration of one year has an exercise price of $40. The risk-free rate is 4.2 percent per year, compounded continuously, and the standard deviation of the stock's return is infinitely large. What is the price of the call option?
A) $2.47
B) $34.80
C) $38.00
D) $5.63
E) $40.00
63) Assume a stock price of $21.80, an exercise price of $20, three months to expiration, a risk-free rate of 3.40 percent, standard deviation of 46 percent, and a d1 value of .52664. What is the value of d2 as it is used in the Black-Scholes option pricing model?
A) .31218
B) .31225
C) .29664
D) .29535
E) .31340
64) Assume a stock price of $34.80, an exercise price of $35, nine months to expiration, risk-free rate of 2.40 percent, standard deviation of 57 percent, and a d1 value of .27167. What is the value of d2 as it is used in the Black-Scholes option pricing model?
A) ?.22196
B) ?.18657
C) ?.18241
D) ?.27427
E) ?.22238
65) Assume a stock price of $31.18, risk-free rate of 3.6 percent, standard deviation of 44 percent, N(d1) value of .62789, and an N(d2) value of .54232. What is the value of a 3-month call option with a strike price of $30 given the Black-Scholes option pricing model?
A) $3.38
B) $3.99
C) $3.68
D) $1.76
E) $3.45
66) Assume a stock price of $16.80, risk-free rate of 2.7 percent, standard deviation of 59 percent, N(d1) value of .93116, and an N(d2) value of .85708. What is the value of a 6-month call with a strike price of $10 given the Black-Scholes option pricing model?
A) $7.62
B) $7.19
C) $8.06
D) $7.85
E) $6.97
67) A stock is currently selling for $39 a share. The risk-free rate is 2.5 percent and the standard deviation is 26 percent. What is the value of d1 of a 9-month call option with a strike price of $40?
A) ?.01506
B) .08341
C) .07746
D) .06420
E) ?.06752
68) A stock is currently selling for $34 a share. The risk-free rate is 3.1 percent and the standard deviation is 33 percent. What is the value of d1 of a 3-month call option with a strike price of $35?
A) ?.01872
B) ?.04621
C) ?.05047
D) ?.02950
E) ?.20356
69) Use the information below to answer the following question.
Assume a stock price of $42; a risk-free rate of 3.5 percent per year, compounded continuously;
a six-month maturity; and a standard deviation of 64 percent per year. If a six-month call with an exercise price of $45 is priced at $6.66, what is the price of the six-month $45 put?
A) $8.57
B) $7.93
C) $8.88
D) $9.07
E) $8.74
70) Use the information below to answer the following question.
You own a lot in Key West, Florida, that you are considering selling. Similar lots have recently sold for $1.2 million. Over the past five years, the price of land in the area has varied with a standard deviation of 19 percent. A potential buyer wants an option to buy the land in the next 9 months for $1,310,000. The risk-free rate of interest is 7 percent per year, compounded continuously. How much should you charge for the option? Round your answer to the nearest $100.
A) $62,000
B) $68,900
C) $63,700
D) $62,500
E) $60,400
71) Use the information below to answer the following question.
Assume a stock price of $88; risk-free rate of 4 percent per year, compounded continuously; time to maturity of five months; standard deviation of 48 percent per year; and a put and call exercise price of $85. What is the delta of the put option?
A) ?.6850
B) ?.3742
C) ?.3158
D) ?.0525
E) ?.4685
72) A call option matures in six months. The underlying stock price is $37 and the stock's return has a standard deviation of 27 percent per year. The annual risk-free rate is 3.4 percent, compounded continuously. The exercise price is $0. What is the price of the call option?
A) $39.65
B) $32.14
C) $36.37
D) $32.23
E) $37.00
73) The delta of a call option on a firm's assets is .624. How much will a project valued at $48,000 increase the value of equity?
A) $18,048
B) $45,336
C) $29,952
D) $76,923
E) $32,189
74) The delta of a call option on a firm's assets is .408. By how much will a $220,000 project increase the value of equity?
A) $89,760
B) $71,622
C) $309,760
D) $130,240
E) $539,216
75) The current market value of the assets of AMN Co. is $47 million, with a standard deviation of 21 percent per year. The firm has zero-coupon bonds outstanding with a total face value of $35 million. These bonds mature in two years. The risk-free rate is 3.6 percent per year, compounded continuously. What is the value of d1 as it applies to the Black-Scholes option pricing model?
A) 1.32471
B) 1.48002
C) 1.60067
D) 1.38357
E) .89006
76) Use the information below to answer the following question.
Chapter 10 Return and Risk: The Capital-Assets-Pricing Model Multiple Choice Questions 1. When a security is added to a portfolio the appropriate return and risk contributions are A) the expected return of the asset and its standard deviation. B) the expected return and the variance. C) the expected return and the beta. D) the historical return and the beta. E) these both can not be measured. Answer: C Difficulty: Medium Page: 255 2. When stocks with the same expected return are combined into a portfolio A) the expected return of the portfolio is less than the weighted average expected return of the stocks. B) the expected return of the portfolio is greater than the weighted average expected return of the stocks. C) the expected return of the portfolio is equal to the weighted average expected return of the stocks. D) there is no relationship between the expected return of the portfolio and the expected return of the stocks. E) None of the above. Answer: C Difficulty: Easy Page: 261 3. Covariance measures the interrelationship between two securities in terms of A) both expected return and direction of return movement. B) both size and direction of return movement. C) the standard deviation of returns. D) both expected return and size of return movements. E) the correlations of returns. Answer: B Difficulty: Medium Page: 258-259 Use the following to answer questions 4-5: GenLabs has been a hot stock the last few years, but is risky. The expected returns for GenLabs are highly dependent on the state of the economy as follows: State of Economy Probability GenLabs Returns Depression .05 -50% Recession .10 -15 Mild Slowdown .20 5 Normal .30 15% Broad Expansion .20 25 Strong Expansion .15 40
公司理财(英文版)题 库2
CHAPTER 2 Financial Statements & Cash Flow Multiple Choice Questions: I. DEFINITIONS BALANCE SHEET b 1. The financial statement showing a firm’s accounting value on a particular date is the: a. income statement. b. balance sheet. c. statement of cash flows. d. tax reconciliation statement. e. shareholders’ equity sheet. Difficulty level: Easy CURRENT ASSETS c 2. A current asset is: a. an item currently owned by the firm. b. an item that the firm expects to own within the next year. c. an item currently owned by the firm that will convert to cash within the next 12 months. d. the amount of cash on hand the firm currently shows on its balance sheet. e. the market value of all items currently owned by the firm. Difficulty level: Easy LONG-TERM DEBT b 3. The long-term debts of a firm are liabilities: a. that come due within the next 12 months. b. that do not come due for at least 12 months. c. owed to the firm’s suppliers. d. owed to the firm’s shareholde rs. e. the firm expects to incur within the next 12 months. Difficulty level: Easy NET WORKING CAPITAL e 4. Net working capital is defined as: a. total liabilities minus shareholders’ equity. b. current liabilities minus shareholders’ equity. c. fixed assets minus long-term liabilities. d. total assets minus total liabilities. e. current assets minus current liabilities. Difficulty level: Easy LIQUID ASSETS d 5. A(n) ____ asset is on e which can be quickly converted into cash without significant loss in value.
CHAPTER 2 Financial Statements & Cash Flow Multiple Choice Questions: I. DEFINITIONS BALANCE SHEET b 1. The financial statement showing a firm’s accounting value on a particular date is the: a. income statement. b. balance sheet. c. statement of cash flows. d. tax reconciliation statement. e. shareholders’ equity sheet. Difficulty level: Easy CURRENT ASSETS c 2. A current asset is: a. an item currently owned by the firm. b. an item that the firm expects to own within the next year. c. an item currently owned by the firm that will convert to cash within the next 12 months. d. the amount of cash on hand the firm currently shows on its balance sheet. e. the market value of all items currently owned by the firm. Difficulty level: Easy LONG-TERM DEBT b 3. The long-term debts of a firm are liabilities: a. that come due within the next 12 months. b. that do not come due for at least 12 months. c. owed to the firm’s suppliers. d. owed to the firm’s shareholders. e. the firm expects to incur within the next 12 months. Difficulty level: Easy NET WORKING CAPITAL e 4. Net working capital is defined as: a. total liabilities minus shareholders’ equity. b. current liabilities minus shareholders’ equity. c. fixed assets minus long-term liabilities. d. total assets minus total liabilities. e. current assets minus current liabilities. Difficulty level: Easy LIQUID ASSETS d 5. A(n) ____ asset is on e which can be quickly converted into cash without significant loss in value.
Chapter 20 Issuing Securities to the Public Multiple Choice Questions 1. An equity issue sold directly to the public is called: A. a rights offer. B. a general cash offer. C. a restricted placement. D. a fully funded sales. E. a standard call issue. 2. An equity issue sold to the firm's existing stockholders is called: A. a rights offer. B. a general cash offer. C. a private placement. D. an underpriced issue. E. an investment banker's issue. 3. Management's first step in any issue of securities to the public is: A. to file a registration form with the SEC. B. to distribute copies of the preliminary prospectus. C. to distribute copies of the final prospectus. D. to obtain approval from the board of directors. E. to prepare the tombstone advertisement. 4. A rights offering is: A. the issuing of options on shares to the general public to acquire stock. B. the issuing of an option directly to the existing shareholders to acquire stock. C. the issuing of proxies which are used by shareholders to exercise their voting rights. D. strictly a public market claim on the company which can be traded on an exchange. E. the awarding of special perquisites to management.
Fundamentals of Corporate Finance, 12e (Ross) Chapter 5 Introduction to Valuation: The Time Value of Money 1) Andy deposited $3,000 this morning into an account that pays 5 percent interest, compounded annually. Barb also deposited $3,000 this morning at 5 percent interest, compounded annually. Andy will withdraw his interest earnings and spend it as soon as possible. Barb will reinvest her interest earnings into her account. Given this, which one of the following statements is true? A) Barb will earn more interest in Year 1 than Andy will. B) Andy will earn more interest in Year 3 than Barb will. C) Barb will earn more interest in Year 2 than Andy. D) After five years, Andy and Barb will both have earned the same amount of interest. E) Andy will earn compound interest. 2) Nan and Neal are twins. Nan invests $5,000 at 7 percent at age 25. Neal invests $5,000 at 7 percent at age 30. Both investments compound interest annually. Both twins retire at age 60 and neither adds nor withdraws funds prior to retirement. Which statement is correct? A) Nan will have less money when she retires than Neal. B) Neal will earn more interest on interest than Nan. C) Neal will earn more compound interest than Nan. D) If both Nan and Neal wait to age 70 to retire they will have equal amounts of savings. E) Nan will have more money than Neal at any age. 3) You are investing $100 today in a savings account. Which one of the following terms refers to the total value of this investment one year from now? A) Future value B) Present value C) Principal amount D) Discounted value E) Invested principal 4) Christina invested $3,000 five years ago and earns 2 percent annual interest. By leaving her interest earnings in her account, she increases the amount of interest she earns each year. The way she is handling her interest income is referred to as: A) simplifying. B) compounding. C) aggregating. D) accumulating. E) discounting.
Chapter 30 Financial Distress Multiple Choice Questions 1. Financial distress can be best described by which of the following situations in which the firm is forced to take corrective action? A. Cash payments are delayed to creditors. B. The market value of the stock declines by 10%. C. The firm's operating cash flow is insufficient to pay current obligations. D. Cash distributions are eliminated because the board of directors considers the surplus account to be low. E. None of the above. 2. Insolvency can be defined as: A. not having cash. B. being illiquid. C. an inability to pay one's debts. D. an inability to increase one's debts. E. the present value of payments being less than assets. 3. Stock-based insolvency is a: A. income statement measurement. B. balance sheet measurement. C. a book value measurement only. D. Both A and C. E. Both B and C. 4. Flow-based insolvency is: A. a balance sheet measurement. B. a negative equity position. C. when operating cash flow is insufficient to meet current obligations. D. inability to pay one's debts. E. Both C and D.
Chapter 13 Risk, Cost of Capital, and Capital Budgeting Answer Key Multiple Choice Questions 1. The weighted average of the firm's costs of equity, preferred stock, and after tax debt is the: A. reward to risk ratio for the firm. B. expected capital gains yield for the stock. C. expected capital gains yield for the firm. D. portfolio beta for the firm. E. weighted average cost of capital (WACC). Difficulty level: Easy Topic: WACC Type: DEFINITIONS 2. If the CAPM is used to estimate the cost of equity capital, the expected excess market return is equal to the: A. return on the stock minus the risk-free rate. B. difference between the return on the market and the risk-free rate. C. beta times the market risk premium. D. beta times the risk-free rate. E. market rate of return. Difficulty level: Easy Topic: CAPM Type: DEFINITIONS
Chapter 04 Discounted Cash Flow Valuation Answer Key Multiple Choice Questions 1. An annuity stream of cash flow payments is a set of: A.level cash flows occurring each time period for a fixed length of time. B. level cash flows occurring each time period forever. C. increasing cash flows occurring each time period for a fixed length of time. D. increasing cash flows occurring each time period forever. E. arbitrary cash flows occurring each time period for no more than 10 years. Difficulty level: Easy Topic: ANNUITY Type: DEFINITIONS
2. Annuities where the payments occur at the end of each time period are called _____, whereas _____ refer to annuity streams with payments occurring at the beginning of each time period. A. ordinary annuities; early annuities B. late annuities; straight annuities C. straight annuities; late annuities D. annuities due; ordinary annuities E.ordinary annuities; annuities due Difficulty level: Easy Topic: ANNUITIES DUE Type: DEFINITIONS
CHAPTER 8 Making Capital Investment Decisions I. DEFINITIONS INCREMENTAL CASH FLOWS a 1. The changes in a firm's future cash flows that are a direct consequence of accepting a project are called _____ cash flows. a. incremental b. stand-alone c. after-tax d. net present value e. erosion Difficulty level: Easy EQUIVALENT ANNUAL COST e 2. The annual annuity stream o f payments with the same present value as a project's costs is called the project's _____ cost. a. incremental b. sunk c. opportunity d. erosion e. equivalent annual Difficulty level: Easy SUNK COSTS c 3. A cost that has already been paid, or the liability to pay has already been incurred, is a(n): a. salvage value expense. b. net working capital expense. c. sunk cost. d. opportunity cost. e. erosion cost. Difficulty level: Easy OPPORTUNITY COSTS d 4. Th e most valuable investment given up i f an alternative investment is chosen is a(n): a. salvage value expense. b. net working capital expense.
Chapter 16 Capital Structure: Basic Concepts Multiple Choice Questions 1. The use of personal borrowing to change the overall amount of financial leverage to which an individual is exposed is called: A. homemade leverage. B. dividend recapture. C. the weighted average cost of capital. D. private debt placement. E. personal offset. 2. The proposition that the value of the firm is independent of its capital structure is called: A. the capital asset pricing model. B. MM Proposition I. C. MM Proposition II. D. the law of one price. E. the efficient markets hypothesis. 3. The proposition that the cost of equity is a positive linear function of capital structure is called: A. the capital asset pricing model. B. MM Proposition I. C. MM Proposition II. D. the law of one price. E. the efficient markets hypothesis. 4. The tax savings of the firm derived from the deductibility of interest expense is called the: A. interest tax shield. B. depreciable basis. C. financing umbrella. D. current yield. E. tax-loss carry forward savings.
第二章财务报表分析 一、单选题 1．假定甲公司向乙公司赊销产品，并持有丙公司的债券和丁公司的股票，且向戊公司支付公司债利息。在不考虑其他条件的情况下，从甲公司的角度看，下列各项中属于本企业与债权人之间财务关系的是（）。（南京大学2011金融硕士） A．甲公司与乙公司之间的关系 B．甲公司与丙公司之间的关系 C．甲公司与丁公两之间的关系 D．甲公司与戊公司之间的关系 【答案】D 【解析】甲公司与乙公司是商业信用关系；甲公司为丙公司的债权人；甲公司是丁公司的股东；戊公司是甲公司的债权人。 2．杜邦财务分析体系的核心指标是（）。（浙江财经学院2011金融硕士） A．总资产报酬率 B．可持续增长率 C．ROE D．销售利润率 【答案】C 【解析】杜邦分析体系是对企业的综合经营理财及经济效益进行的系统分析评价，其恒
等式为：ROE=销售利润率×总资产周转率×权益乘数。可以看到净资产收益率（ROE）反映所有者投入资金的获利能力，反映企业筹资、投资、资产运营等活动的效率，是一个综合性最强的财务比率，所以净资产收益率是杜邦分析体系的核心指标。 3．影响企业短期偿债能力的最根本原因是（）。（浙江财经学院2011金融硕士）A．企业的资产结构 B．企业的融资结构 C．企业的权益结构 D．企业的经营业绩 【答案】D 【解析】短期偿债能力比率是一组旨在提供企业流动性信息的财务比率，有时也被称为流动性指标。它们主要关心企业短期内在不引起不适当压力的情况下支付账单的能力，因此，这些指标关注企业的流动资产和流动负债，但短期偿债能力比率的大小会因行业类型而不同，影响企业短期偿债能力的最根本原因还是企业的经营业绩。 4．市盈率是投资者用来衡量上市公司盈利能力的重要指标，关于市盈率的说法不正确的是（）。（浙江工商大学2011金融硕士） A．市盈率反映投资者对每股盈余所愿意支付的价格 B．市盈率越高表明人们对该股票的评价越高，所以进行股票投资时应该选择市盈率最高的股票 C．当每股盈余很小时，市盈率不说明任何问题 D．如果上市公司操纵利润，市盈率指标也就失去了意义
CHAPTER 20 INTERNATIONAL CORPORATE FINANCE Answers to Concepts Review and Critical Thinking Questions 1. a. The dollar is selling at a premium because it is more expensive in the forward market than in the spot market (SFr 1.53 versus SFr 1.50). b.The franc is expected to depreciate relative to the dollar because it will take more francs to buy one dollar in the future than it does today. c.Inflation in Switzerland is higher than in the United States, as are nominal interest rates. 2.The exchange rate will increase, as it will take progressively more pesos to purchase a dollar. This is the relative PPP relationship. 3.a.The Australian dollar is expected to weaken relative to the dollar, because it will take more A$ in the future to buy one dollar than it does today. b.The inflation rate in Australia is higher. c.Nominal interest rates in Australia are higher; relative real rates in the two countries are the same. 4. A Yankee bond is most accurately described by d. 5. No. For example, if a cou ntry’s currency strengthens, imports bee cheaper (good), but its exports bee more expensive for others to buy (bad). The reverse is true for currency depreciation. 6.Additional advantages include being closer to the final consumer and, thereby, saving on transportation, significantly lower wages, and less exposure to exchange rate risk. Disadvantages include political risk and costs of supervising distant operations. 7. One key thing to remember is that dividend payments are made in the home currency. More generally, it may be that the owners of the multinational are primarily domestic and are ultimately concerned about their wealth denominated in their home currency because, unlike a multinational, they are not internationally diversified.
CHAPTER 8 MAKING CAPITAL INVESTMENT DECISIONS Answers to Concepts Review and Critical Thinking Questions 1. In this context, an opportunity cost refers to the value of an asset or other input that will be used in a project. The relevant cost is what the asset or input is actually worth today, not, for example, what it cost to acquire. 2. a.Yes, the reduction in the sales of the company’s other products, referred to as erosion, and should be treated as an incremental cash flow. These lost sales are included because they are a cost (a revenue reduction) that the firm must bear if it chooses to produce the new product. b. Yes, expenditures on plant and equipment should be treated as incremental cash flows. These are costs of the new product line. However, if these expenditures have already occurred, they are sunk costs and are not included as incremental cash flows. c. No, the research and development costs should not be treated as incremental cash flows. The costs of research and development undertaken on the product during the past 3 years are sunk costs and should not be included in the evaluation of the project. Decisions made and costs incurred in the past cannot be changed. They should not affect the decision to accept or reject the project. d. Yes, the annual depreciation expense should be treated as an incremental cash flow. Depreciation expense must be taken into account when calculating the cash flows related to a given project. While depreciation is not a cash expense that directly affects c ash flow, it decreases a firm’s net
Chapter 26 Short-Term Finance and Planning Multiple Choice Questions 1.The length of time between the acquisition of inventory and the collection of cash from receivables is called the: A.operating cycle. B.inventory period. C.accounts receivable period. D.accounts payable period. E.cash cycle. 2.The length of time between the acquisition of inventory and its sale is called the: A.operating cycle. B.inventory period. C.accounts receivable period. D.accounts payable period. E.cash cycle. 3.The length of time between the sale of inventory and the collection of cash from receivables is called the: A.operating cycle. B.inventory period. C.accounts receivable period. D.accounts payable period. E.cash cycle.
Chapter 21 Leasing Multiple Choice Questions 1.In a lease arrangement, the owner of the asset is: A.the lesser. B.the lessee. C.the lessor. D.the leaser. E.None of the above. 2.In a lease arrangement, the user of the asset is: A.the lesser. B.the lessee. C.the lessor. D.the leaser. E.None of the above. 3.Which of the following would not be a characteristic of a financial lease? A.They are not usually fully amortized. B.They usually do not have maintenance necessary for the leased assets. C.They usually do not include a cancellation option. D.The lessee usually has the right to renew the lease at expiration. E.All of the above are characteristics of financial leases.
4.An independent leasing company supplies ___________ leases versus the manufacturer who supplies ________________ leases. A.leveraged; direct B.sales and leaseback; sales-type C.capital; sales-type D.direct; sales-type E.None of the above