Ashworth Semester Exam BU340 Managerial Finance I

Question 1

A ________ has limited liability, is a legal entity, and can issue bonds.

sole proprietorship

general partnership

limited partnership

corporation

Question 2

________ is the name given to the processes surrounding recognition of the principal-agent problem and ways to align agents with the interests of the principals.

Principal theory

Interested party theory

Agency theory

Compensation process theory

Question 3

Which of the following items may be included on all balance sheets at Yahoo! Finance, even though they may not be part of an individual company's balance sheet for that year?

The effect of accounting changes, extraordinary items, and treasury stock

Deferred long-term asset charges, treasury stock, and extraordinary items

Goodwill, deferred long-term asset charges, and treasury stock

Cost of revenue, goodwill, and treasury stock

Question 4

In finance, we separate operating decisions from financing decisions, and thus exclude ________ as a part of operating income from the income statement.

cash flow

dividends

interest expense

earnings

Question 5

You have purchased a Treasury bond that will pay $10,000 to your newborn child in 15 years. If this bond is discounted at a rate of 3.875% per year, what is today's price (present value) for this bond?

8417

8500

5654

10000

Question 6

What type of loan requires both principal and interest payments as you go, making equal payments each period?

Amortized loan

Interest-only loan

Discount loan

Compound loan

Question 7

APRs must be converted to the appropriate periodic rates when compounding is:

more frequent than once a year.

less frequent than once a year.

more frequent than once a month.

less frequent than once every six months.

Question 8

The appropriate rate to use to discount the cash flows of a bond in order to determine the current price is the:

yield to maturity

coupon rate

par rate

current yield

Question 9

Bonds are different from stocks because:

bonds promise fixed payments for the length of their maturity.

bonds give payments only after other owners are paid.

bonds do not have maturity dates.

bonds promise growth in earnings

Question 10

Robert invested in stock and received a positive return over a nine-month period. Which of the following types of returns will be greater?

Holding period return (HPR)

Effective annual return (EAR)

Annual percentage rate (APR)

There is not enough information to make a definitive choice.